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Assignment:
Consider the market for software engineers. Suppose there is a decrease in labor demand. We assume the following:
. It takes time to produce a software engineer.
. Agents decide to become software engineers before entering the labor market.
. They make the decision based on running wages in different occupation at time of school choice.
What happens to equilibrium wages and employment in short run and long run as a result of the decrease in demand? Draw and explain all the steps. How does your answer change if we assume that agents have rational expectations?
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