1. Why is the interest rate irrelevant in the one-period general equilibrium model? What is the mechanism for the interest rate affecting labour supply in the two period model?
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- Consider now the two-period model in general equilibrium, so that prices, investment and labour supply are endogenous, i.e. the production economy. Analyse and carefully explain graphically and in words the general equilibrium effects of a decrease in TFP(total factor production) for a benchmark economy with no frictions.Describe the neoclassical model of labor -leisure choice model by emphasizing the objective function, constraint and optimality conditions?What does the assumption of market clearing imply?(Explain) and Howapplicable is this assumption to the labour market in the longrun as well as the shortrun?
- A3 in the McCall partial equilibrium model, if unemployed individual can only live for 10 periods. In each period, she will receive $400 if unemployed. The offered wage is uniformly distributed in the range of [500,1000] 1.what will the reservation wage be in the period 9 if the discount rate is 0.9? 2.what will the reservation wage be in the period 8 if the discount rate is 0.9?Analyse how a Neoclassical version of the labour market would indicate that, in equilibrium, all unemployment is voluntary, and how, assuming imperfect competition instead, would account for the existence of some involuntary unemployment.Land is a factor specific to producing olives. When Padua starts to trade, it exports olives. Using the specific factors model, explain what happens to nominal and real rental rates of land.
- Consider a diagram in which employment is measured in the horizontal axis, and real wage is measured in the vertical axis. Which of the following questions about the labour supply and wage setting curves is correct? Select one: a. For any real wage, the wage setting curve shows the amount of labour that will be supplied. b. The wage-setting curve shows the real wage necessary at each level of economy-wide employment to provide workers with incentives to work hard and well. c. None of the listed answers is correct. d. Where the wage-setting and labour supply curves intersect, all unemployment is voluntary. Cuts in public expenditure do not guarantee a reduction in the government’s deficit because: Select one: a. None of the listed answers is correct. b. Firms will try to pay less tax. c. Aggregate demand falls, and firms invest less. d. There is a fall in autonomous consumption. e. Aggregate demand will fall, reducing government revenue. There are 10 cars on…Q. 12-15. Consider the standard job search model as described in the text. (a) Why are the asking wage and expected unemployment duration positively related? (b) Can the standard job search model explain why unemployment duration is longer, on average, for secondary workers when compared to primary workers? Discuss. (c) In the context of the standard search model, explain how the economy-wide average asking wage and unemployment duration are affected by an expanded underground (cash) economy. What is the effect on the equilibrium unemployment rate? BOOK: Labor Economics, 8th Edition, by George Borjas, published by McGraw-Hill. Chapter 12what happens in the work-leisure model, when the wage rate is decreasing and income effect is stronger than substitution effect?
- (a) If the interest rate differs across agents, who will value firms more, the one that face higher or the ones that face a lower rate, and why? Provide a numerical example. (b) Suppose the firms in the economy produce according to the production process described by the function az−z2, where the parameter a takes different values. If the interest rate is given by r q, which value the parameter a has to take for firms to be active? (c) Suppose that the central bank has control over r q and decides to lower the rate. Will more firms enter the market or firms will quit the market and why? Accordingly, will the optimal input z increase or decrease?In a consumption-leisure model, where P is the price of consumption and w is the wageand h is the hours, how do I mathematically calculate the effect of wage jncrease (wage/price of good) on the ff: >consumption>leisure>hours worked How do I know which is stronger between income effect and substitution effect due to increase in w/p? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.Question1) a) A labor market is in steady state equilibrium with unemployment rate u = 0.04 and probability of re-employment per month λ = 0.12. What is the probability of becoming unemployed in a month? b) What is the size of the labor force when the number of unemployed is U = 20,000? How long does an unemployment spell last on average? c) An increase in unemployment benefits makes the duration of unemployment spells 10 months. What is the new level of unemployment? d) In a simple job search model, the probability of an unemployed worker finding a job (λ) is equal to the probability of receiving a job offer (µ) times the probability of accepting it (p). Assume that the reduction in λ from part a) to part c) is not due to changes in unemployment benefits, but rather due to changes in µ. If p remains constant at 0.2, what is the reduction in µ? e) It is not realistic to assume that p remains constant. Explain why. Assuming that the wage distribution is fixed, in which direction…