4

Question 2 10 points P- adult population, L-labor force, E- employed, U-unemployed, L=E+U, e=E/P - employment rate, m=L/P - participation rate, u=U/L - unemployment rate, U+E=L, ute=1, a - accession rate, s-separation rate, ut+1= ut+ser-aut, Aut+1 = s(1-up)-aut, steady-state unemployment rate u = s/(s+a), A=1-(s+a) - speed-of-adjustment parameter, smaller A corresponds to a more dynamic labor market. Assume 0