Q1. Assume which there is an increase in total factor productivity. In the search model of unemployment, Find out the effects of this on the reservation wage and on the steady state unemployment rate.
Q2. Assume which, in the efficiency wage model, it becomes more difficult for the ?rm to distinguish high-ability workers from low-ability workers in the labor market. Illustrate effects does this have on e(w) and the efficiency wage?
Q3. Assume the peso cost of a dollar was 12.2 pesos/$ in 2005 and 13.9 pesos/$ in 2008. With 2005 as the index year (index=100), if the cost index for Mexico was 125.2 in 2008 and which for the United States was 106.7 in 2008, was the dollar overvalued or undervalued in 2008 according to PPP? Explicate