Homework 2. Please submit a hard copy (neatly handwritten). Name and ID# required. Don’t forget to
put TA’s name as well. No late assignments accepted. See syllabus for the due date. Show works!!
1. If the rate of job separation is 0.01 per month and the rate of job finding is 0.09 per month:
a. What is the natural rate of unemployment?
b. If the economy were at a steady-state unemployment rate and the labor force was 100 million, how
many individuals would lose their jobs each month?
2. Assume that the real wage in an economy is held above equilibrium.
a. Graphically illustrate how an increase in technology that raises the demand for labor will change the
number of unemployed workers. Be sure to label the axes and the quantities of labor hired before and
after the technological progress.
b. Explain in words what happens to the number of unemployed as a result of this change.
3. Assume that the real wage in an economy is held above equilibrium.
a. Graphically illustrate how an increase in the supply of labor will change the number of unemployed
workers. Be sure to label the axes and the quantities of labor hired before and after the increase in the
supply of labor.
b. Explain in words what happens to the number of unemployed as a result of this change.
Chapter 4: The following end of chapter questions and problems are required.
Problems and Applications: 5, 6
Chapter 5: The following end of chapter questions and problems are required.
Problems and Applications: 1