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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: I4Q) = b + 6[m(1: 3')]a[z - 5]] 1 k \"(19) = m 1. Draw and carefully label the two graphs depicting equilibrium in the model. 2. How will an increase in the benet b 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 rate1 the vacancy rate and the aggregate output? Explain intuitively. 4. How will an decrease in the cost of recruting k a'ect the equilibrium market tightness j, the unemployment rate1 the vacancy rate and the aggregate output? Explain intuitively
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