Suppose the separation rate is 3% and the finding rate is 24%
a. What is the natural rate of unemployment?
b. If the separation rate remains at 3% and finding rate doubles, what is the new natural rate of unemployment?
c. If the separation rate is cut in half and the finding rate remains at 24%, what is the new natural rate of unemployment?
d. Which has more impact: a doubling of the finding rate or a halving of the separation rate?
a. The natural rate of unemployment = 3/(3 + 24 ) = 11.11%.
b. The new natural rate of unemployment = 3/(3 + 48 ) = 5.88%.
c. The new natural rate of unemployment = 1.5/(1.5 + 24 ) = 5.88%.
d. The impact is the same.
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