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# Suppose 25000 persons become unemployed You are given the following data about the length of unemployment spells in the economy Duration of Spell in months Exit Rate

Suppose 25,000 persons become unemployed. You are given the following data about the length of unemployment spells in the economy:

 Duration of Spell (in months) Exit Rate 1 0.60 2 0.20 3 0.20 4 0.20 5 0.20 6 1.00

where the exit rate for month t gives the fraction of unemployed persons who have been unemployed t months and who “escape” unemployment at the end of the month. a. How many unemployment-months will the 25,000 unemployed workers experience? b. What fraction of persons who are unemployed are “long-term unemployed” in that their unemployment spells will last five or more months? c. What fraction of unemployment months can be attributed to persons who are long-term unemployed? d. What is the nature of the unemployment problem in this example: too many workers losing their jobs or too many long spells?

May 01 2020 View more View Less