Discuss the possible effects of 𝐺 on the labour market tightness, the labour force, the number of private firms and the aggregate output in the economy.
Macro-economists are usually interested in the following questions. How are aggregate labour market outcomes: unemployment, job vacancies, and employment determined as equilibrium phenomena? Why do unemployed workers and unfilled vacancies coexist? Suppose that the government can operate 𝐺 firms, subject to the same constraints as private firms. The government also incurs the same cost (𝑘) […]