Determine the actual unemployment rate after the recessionary gap appears.

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Chapter 13, Problem 13.3CC

To determine

Determine the actual unemployment rate after the recessionary gap appears.

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When a recessionary gap occurs, Real output exceeds the natural level of output, and unemployment exceeds its natural rate Real output exceeds the natural level of output, and unemployment is less than its natural rate. Real output is less than the natural level of output, and unemployment exceeds its natural rate. Real output is less than the natural level of output, and unemployment is less than its natural rate.

Suppose that output is produced according to the production function Y =Kα[(1 - u)L]1-α, where K is capital, L is the labor force, and u is the natural rate of unemployment. The national saving rate is s, the labor force grows at rate n, and capital depreciates at rate d. Express output per worker (y = Y/L) as a function of capital per worker (k = K/L) and the natural rate of unemployment (u). Write an equation that describes the steady state of this economy. Find the steady state capital per worker and steady state output per worker. Does this production function have constant returns to scale? Explain.

Suppose that output is produced according to the production function Y =Kα[(1 - u)L]1-α, where K is capital, L is the labor force, and u is the natural rate of unemployment. The national saving rate is s, the labor force grows at rate n, and capital depreciates at rate d. Express output per worker (y = Y/L) as a function of capital per worker (k = K/L) and the natural rate of unemployment (u). Write an equation that describes the steady-state of this economy. Find the steady-state capital per worker and steady-state output per worker. Does this production function have constant returns to scale? Explain.