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Question 1 This question examines the DMP model of search and unemployment seen in class. Recall that the two equations determining equilibrium in this model
Question 1 This question examines the DMP model of search and unemployment seen in class. Recall that the two equations determining equilibrium in this model are given by: 1/012) = b + e[m(1,j)]alz - b], 1 k \"(L 5) m 1. Draw and carefully label the two graphs depicting equilibrium in the model. 2. How will an increase in the benet I) affect the equilibrium market tightness j, the unem~ ployment rate, the vacancy rate and the aggregate output? Explain intuitively. 3. How will an increase in the productivity 2: affect the equilibrium market tightness j, the unemployment rate, the vacancy rate and the aggregate output? Explain intuitively. 4. How will an decrease in the cost of recruting k affect the equilibrium market tightness j, the unemployment rate, the vacancy rate and the aggregate output? Explain intuitively
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