D 4 points Define the unemployment rate and the labor force participation rate

D 4 points define the unemployment rate and the labor

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D.(4 points) Define the unemployment rate and the labor-force participation rate using thenotation above. ) L (4 points) Currently, the unemployment rate in the US is very close to what we mayconsider a long-run value, but the labor-force participation rate is considerably lowert-1than its long-run (average) value. Does this suggest Ois above its long-run (average)t-1t-1value, while E, and Uare both below their long-run values? 2. Consider a perfectly competitive economy in long-run equilibrium. Assume the aggregateproduction function isY = AKL1/3 2/3where Yrepresents output, Kand Lrepresent the inputs of capital and labor, and Ais totalfactor productivity (represents technology, broadly defined) . Assume labor supply is completely inelastic, and the labor input is constant over time. Assumethat in the equilibrium we observe, output and the capital stock both grow at the (continuously
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compounded) average annual rate of 3 percent, the monetary aggregate M2 grows at a 4 percentrate, and the income velocity of M2 grows 1 percent. A.(9 points) What is the inflation rate in this economy? What are the implied growth ratesof real and nominal wages? Y L L
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