Question 1

In the two-sided search model, the equilibrium effects of an increase in productivity are to

Accepted Answer

An increase in productivity in the two-sided search model leads to an increase in the number of job vacancies and a decrease in the number of unemployed workers. This leads to an increase in market tightness (i.e. the ratio of vacancies to unemployed workers), which leads to a decrease in the duration of unemployment and an increase in the number of filled jobs. This, in turn, increases aggregate output. Therefore, option A correctly explains the equilibrium effects of an increase in productivity.

Question 2

In equilibrium, an increase in Employment Insurance benefits

Accepted Answer

An increase in Employment Insurance benefits makes it more attractive for people to stay unemployed, which increases the unemployment rate. It also makes it more difficult for employers to find workers, which increases the vacancy rate.

Question 3

In the two-sided search model, an increase in productivity

Accepted Answer

An increase in productivity raises the value of matches, shifting v(Q) up, which increases both the quantity of matches (Q) and the job-finding rate (j).

Question 4

In equilibrium, an increase in Employment Insurance benefits

Accepted Answer

An increase in Employment Insurance benefits makes it easier for workers to stay unemployed for longer periods of time, leading to an increase in the supply of labour and a decrease in labour market tightness. However, the effects on quantity of labour (Q) and output (Y) are ambiguous, as the increase in benefits could also lead to a decrease in labour market participation and productivity.

Question 5

In equilibrium in the two-sided search model, labour force participation is

Accepted Answer

In the two-sided search model, higher market tightness (more vacancies relative to job seekers) makes it more attractive for workers to participate in the labor force, thus increasing labor force participation.

Question 6

In the two-sided search model, an increase in Employment Insurance benefits makes labour search

Accepted Answer

An increase in Employment Insurance benefits makes labour search more attractive because it provides a "safety net" for individuals who are unemployed. As a result, they may be more willing to take their time and search for a job that is a better match for their skills and preferences, rather than accepting the first job offer that comes along out of desperation.

Question 7

Based on the predictions of the two-sided search model, the Beveridge curve

Accepted Answer

The answer of Based on the predictions of the two-sided...

Question 8

The Beveridge Curve is the

Accepted Answer

The Beveridge Curve illustrates a negative relationship between the unemployment rate and the vacancy rate, showing how job vacancies and unemployment interact in the labor market.

Question 9

In equilibrium, an decrease in matching efficiency

Accepted Answer

A decrease in matching efficiency means that it is harder for job seekers and employers to find each other, leading to a decrease in the number of matches. This results in an increase in the unemployment rate because job seekers are unable to find employment opportunities. However, vacancies remain constant because there are still job openings available, but they are not being filled due to the decrease in matching efficiency.

Question 10

There has been considerable debate as to the appropriate level of Employment Insurance benefits paid out to unemployed workers. What do models of labour market search tell us about the effects of employment insurance benefits and their effects on the economy. Explain what conclusions we can draw concerning the optimal generosity of the employment insurance program.

Accepted Answer

The answer of There has been considerable debate as to...

Question 11

In equilibrium in the two-sided search model, aggregate output is given by

Accepted Answer

The answer of In equilibrium in the two-sided search model,...

Question 12

The two-sided search model is consistent with which of the following business cycle facts?

Accepted Answer

The two-sided search model predicts that the unemployment rate is countercyclical because during recessions, there are fewer job opportunities available and more job seekers, leading to higher unemployment. Conversely, during expansions, there are more job opportunities available and fewer job seekers, leading to lower unemployment. The model also predicts that the vacancy rate is procyclical because firms are more likely to have job openings during expansions when the economy is growing and demand for their goods and services is higher, and less likely to have job openings during recessions when demand is lower. Option D is the only choice that accurately reflects both of these predictions.

Quiz 6: Search and Unemployment

In the two-sided search model, the equilibrium effects of an increase in productivity are to

In equilibrium, an increase in Employment Insurance benefits

In the two-sided search model, an increase in productivity

In equilibrium, an increase in Employment Insurance benefits

In equilibrium in the two-sided search model, labour force participation is

In the two-sided search model, an increase in Employment Insurance benefits makes labour search

Based on the predictions of the two-sided search model, the Beveridge curve

The Beveridge Curve is the

In equilibrium, an decrease in matching efficiency

In equilibrium in the two-sided search model, aggregate output is given by

The two-sided search model is consistent with which of the following business cycle facts?