Please help me answer this question In the Mortensen-Pissarides model of unemployment with constant wage (w By+ (1-3) b), if labor productivity (y) falls then market tightness___________ andunemployment ________Falls; increasesIncreases; decreases.O Doesn't change; decreasesIncreases; increasesFalls: decreasesAccording to the vacancy supply condition, firms keep opening vacancies until thecost of opening a vacant job isthe expected sum of profits from a vacancy.O equal togreater thanOnone of the aboveless thangreater than. You selected this answer.

Answered: In the Mortensen-Pissarides model of…

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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In the Mortensen-Pissarides model of unemployment with constant wage (
w By+ (1-3) b), if labor productivity (y) falls then market tightness___________ and
unemployment ________
Falls; increases
Increases; decreases.
O Doesn't change; decreases
Increases; increases
Falls: decreases
According to the vacancy supply condition, firms keep opening vacancies until the
cost of opening a vacant job is
the expected sum of profits from a vacancy.
O equal to
greater than
Onone of the above
less than
greater than. You selected this answer.

Expert Solution

Step 1

Mortensen-Pissarides model is defined as a model which states the volatility of unemployment, however, it also overstates the volatility of labor market tightness and the magnitude of the unemployment–vacancy.

Given,

Labour productivity falls

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