Y6

3. [Employment and Unemployment] Suppose a country has a working-age population of 500 people. The demand and supply functions of its labor market aro w-400-0.4L w=160+0 2L where w is the wage, L is the quantity of labor. The labor market has search friction so that those that are looking for a job may not immediately find one even when there are openings. Specifically, Assume the number of job matches (Le. employment) is given by: 0.8L (a) Find the equilibrium wage and the actual number of employed people. Calculate the labor force participation rate and unemployment rate. (b) Briefly explain in words, and with a specific example of each, the difference between structural and frictional unemployment. (c) The COVID-19 pandemic lowers the labor demand, and the now labor demand becomes w=340-0 4L. Assume that the wage can adjust quickly, find the equilibrium wage and the actual number of employed people during the pandemic