1) in the model of public goods, describe how the government determines public s

Question

1) in the model of public goods, describe how the government determines public spending, and

explain what happens if the quantity of GDP goes up.

2) Discuss how labor force participation has evolved in the United States since 1948, in terms

of total labor force participation and the participation of men and women.

3) Explain how the reservation wage is determined in the one-sided search model.

4) Determine what happens to the unemployment rate and the reservation wage in the one-

sided search model if the separation rate decreases.

5) Suppose that matching efficiency increases. In the two-sided search model, determine the

equilibrium effects, and explain.

6) Suppose that total factor productivity falls. In the two sided search model, what are the

equilibrium effects, and why?

Explanation / Answer

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Answer-

1. the public goods are those goods which are available for use by all. They are non-excludable and non-rivalrous in nature. Public goods are those where use by one does not makes is unavailable for another. The examples of public good are parks, air we breathe etc. in the model of public goods the determines the public spending by the way of marginal cost benefit. The optimal quantity of public good occurs at the position where the demand curve intersects the supply curve. The demand curve represents the marginal benefit and supply curve represents the marginal cost. So the government uses marginal cost benefit analysis to decide how much should be spend in a particular public good. The marginal cost should be less than marginal benefit if the marginal cost is more than the marginal benefit then definitely there is more allocation than required. The governments decides to spend in a particular public good on the basis of marginal cost and if marginal cost is more than the benefit derived then government will not spend or reallocate so that marginal cost is less.If the quantity of GDP goes up then there would be demand more money in market as people will require more to match up with the increased GDP. Increase in GDP affect on the market adversely as the demand of money increases and the supply need to be matched but because of less supply and high demand price goes up and affects the economy.

2. The labor force participation has evolved a lot since 1948 in United States as now more number of people work and use there abilities for the best. Over the years the labor force participation has evolved to great extent, it has seen its highs and low. In present situation the labor force participation overall is above 60%. The male and female ratio has defiantly increased over the time. Previously more of men were part of labor force but in todays time the participation of women have increased and the ration of men and women now is around 56% according to data published. The ratio of men and women labor participation has increased and improved since 1948. The reason for such improvement is that now people are more inclined to jobs, now there are more job opportunities, there are better prospects for women etc. thus we can safely that the labor force participation as a whole and in terms of men and women ration has evolved a lot and is in a better situation.

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