# CH6 - Import Settings Base Settings Brownstone Default...

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Import Settings: Base Settings: Brownstone Default Information Field: Level Information Field: Sub Topic Information Field: Topic Highest Answer Letter: D Multiple Keywords in Same Paragraph: No Chapter: CH6 Instruction: Name: __________________________ Date: _____________ Short Answer 1. If the rate of job separation is 0.02 per month and the rate of job finding is 0.10 per month, what is the natural rate of unemployment? Ans: 16.67 percent Topic: Numerical Problems 2. If the economy were at a steady-state unemployment rate with a separation rate of 0.02 per month and a job-finding rate of 0.10 per month, and the labor force was 100 million, how many individuals would lose their jobs each month? Ans: 1.67 million Topic: Numerical Problems

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Assume that an employer believes that the “efficiency” ( e ) it can get from a particular worker, as a function of the hourly wage ( w ), is given by function e = –0.125 w + 0.15 w 2 – 0.005 w 3 , at least up to a wage of 30. a. Create a table of w , e , e / w , and w / e for wages equal to 5, 10, 14, 15, 16, 20, and 25. b. Which wage gives the highest ratio of efficiency per unit of labor cost? c. Once the firm has hit on an optimal w , whatever it is, would cutting wages whenever demand falls off increase or decrease wages per unit of efficiency? Ans: a. w e e/w w/e 5 2.50 0.500 2.000 10 8.75 0.875 1.143 14 13.93 0.995 1.005 15 15.00 1.000 1.000 16 15.92 0.995 1.005 20 17.50 0.875 1.143 25 12.50 0.500 2.000 b. 15 c. Cutting wages (any wage lower than 15) would increase wages per unit of efficiency. Topic: Numerical Problems 4. Assume that a society consists of two types of workers. For type A, 3 million workers lose their jobs each year, and each one takes a year to find a new one. For type B, 36 million workers lose their jobs each year (3 million per month), and each takes one month to find a new job. Thus, at any given time, 6 million are unemployed in this economy. a. How many “spells” of unemployment occur each year in this economy? b. What percentage of the “spells” are only one month long? c. If you take all the workers unemployed each year and multiply each by the length of his or her unemployment “spell,” how many “months” of unemployment would there be in this economy each year? d. Of all the “months” of unemployment, how many are accounted for by the workers unemployed a year at a time? Ans:
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CH6 - Import Settings Base Settings Brownstone Default...

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