In the one-sided search model, if the job offer rate goes down
A)the reservation wage goes up and long-run unemployment goes down.
B)the reservation wage goes down and the effect on long-run unemployment is ambiguous.
C)the reservation wage goes up and long-run unemployment goes up.
D)unemployed workers stop searching.
E)the reservation wage and long-run unemployment are unchanged.

Question

Quizplus · Accepted Answer

When the job offer rate decreases, it means that jobs are harder to find, so workers are more likely to accept lower-paying jobs. This leads to a decrease in the reservation wage—the minimum wage at which a worker is willing to accept a new job. The effect on long-run unemployment is ambiguous because it depends on other factors such as the rate at which workers leave jobs and how the lower job offer rate affects the overall economy.

In the One-Sided Search Model, If the Job Offer Rate