What is the natural rate of unemployment

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Reference no: EM13885890

(a) Given a constant job separation rate of 2% and a job finding rate of 33%, what is the natural rate of unemployment according to the bathtub model of unemployment? (b) Describe the intuition behind why, if the separation and finding rates are fixed, the unemployment rate will converge toward a particular level, regardless of how high it began. (Hint: think about the 2nd equation in the bathtub model, equation 7.3 in the book)

Reference no: EM13885890

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