Question

Suppose the government’s goal is to reduce the unemployment rate. Some legislators propose that the government should give a subsidy s to any firm that hires a worker. Some other legislators argue that it would be more effective to simply pay consumers to stay home rather than searching for work, that is, anyone who chooses not to participate in the labor force should receive a payment q. Which policy is more effective in achieving the government’s goal? Explain using the DMP model, with the aid of diagrams. (In your answer, do not concern yourself with how subsidies from the government are financed.)

Answer 1

Ansese Cl al 쓰 to-reduce the Dvernment go unemplo hae → The best cooy to reduce the unemp moieenm avenues an the ccepobes possible mannen →in -tha sese the peben subsides to the lims ining labovon orce Seemsmast Vao The nesos subside、 he 身1vms mot engage more and mo re labor ngssd tho coun by enoreasin orce al et ng Cempensa to people for not coorf Simpe or ocs no