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Economics 653 Economics of the Labor Market Assignment 5 Professor Sanjay Chugh Spring 2022 Due: Monday, February 28, 2022 at 11:00am ET (Note: all submissions

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Economics 653 Economics of the Labor Market Assignment 5 Professor Sanjay Chugh Spring 2022 Due: Monday, February 28, 2022 at 11:00am ET (Note: all submissions must be submitted via Blackboard) Unemployment Benefits and the Matching Market. The Efficient Planner (aka, Social Planner) has determined allocations for the economy. All of a sudden, the fiscal authority (e.g., Congress) introduces (for political reasons) positive unemployment benefits (i.e., ble > 0). a. Starting from the efficient job-creation function in the diagram, does the job-creation function shift upon the introduction of positive unemployment benefits? If so, does it shift inwards or outwards? If not, why not? Briefly explain. b. Starting from the efficient labor-force participation function in the diagram, does the labor-force participation function shift upon the introduction of positive unemployment benefits? If so, does it shift inwards or outwards? If not, why not? Briefly explain. c. Taking into account any possible shifts in the job-creation function and/or the labor-force participation function, does a deadweight loss (aka, non-zero "wedge") arise? If so, qualitatively sketch it. If not, briefly explain why not. Efficient labor-force participation (aka "labor supply") JEFF Efficient job-creation (aka "labor demand") nEFF

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