Question

Suppose the labour force of an economy is equal to 1,000 and the unemployment on December 2010 is 0 . Then, suppose that in January 2011 and every month that follows, 52 workers become unemployed for 1 month, 39 become unemployed for 2 months, 23 become unemployed for 3 months and 15 become unemployed for 15 months.

When will the economy reach its steady state?

Answer 1

The student's question involves calculating when an economy will reach steady state unemployment given certain monthly unemployment dynamics, which requires analyzing the balance between job losses and the number of individuals finding jobs.

Step-by-step explanation:

The question pertains to calculating the steady state of unemployment in an economy given a certain scenario of unemployment rates over various durations. The student is asked to determine when the economy will reach a point where the inflow and outflow of unemployment reach equilibrium.

Using the information provided, we know that various workers become unemployed for different durations each month. Key dynamics involved in this scenario include the duration of unemployment for different workers, as well as the understanding of how the unemployment rate is affected by both job losses and job creation over time. Normally, changes in the unemployment rate can reflect significant shifts in job availability for a large population of workers.

The concept of 'steady state' in the context of unemployment suggests a balance between the number of jobs being lost and the number of unemployed individuals finding jobs, despite the fluctuating number of unemployed workers with varying jobless durations.