Question

If the steady-state rate of unemployment equals 0.125 and the fraction of unemployed workers who find jobs each month (the rate of job findings) is 0.56, then the fraction of employed workers who lose their jobs each month (the rate of job separations) must be:

A) 0.08.
B) 0.125.
C) 0.22.
D) 0.435.

Answer 1

The rate of job separations= 0.08

Step-by-step explanation:

If s is the rate of job separation, f is the rate of job finding, and both rates are constant, then the unemployment rate is approximately: s/(s + f) therefore, rearranging terms to find job separation and indicating unemployment by Um, we have =

f*Um / ( 1-Um) = 0.125*( 0.56) / ( 1- 0.125 ) = 0.08.