What is the unemployment rate in this economy

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a. Suppose the layoff rate is 0.02 per month and the average duration of a spell of unemployment is four and a half months. What is the unemployment rate in this economy?

b. Suppose that an increase in employment insurance benefits causes the layoff rate to increase to 0.21. What would be the effect on the unemployment rate and why would it change?

c. Suppose that an increase in employment insurance benefits causes the average duration of a spell of unemployment to increase by one week. What would be the effect on the unemployment rate and why would it change?

Reference no: EM131389629

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