During the past 50 years, Singapore has seen huge changes: rapid population growth and the introduction of newer and newer technologies. Singapore has modest unemployment benefits, no minimum wage, and weak labor unions.

1. Does Singapore’s unemployment arise mainly from job search or job rationing?

2. Which of the factors listed above suggest that Singapore has a higher natural unemployment rate than the United States and which suggest that Singapore has a lower natural unemployment rate?

3. Figure 1 illustrates the labor market in an economy in which at full employment, 1,000 people a day job search. What is the equilibrium real wage rate and employment? Calculate the natural unemployment rate.

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FIGURE 1 Real wage rate (2009 dollars per hour) LS 5 4 3 2 2 + 3 2 4 5 Labor (thousands of workers per day) LD 0