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.
Macroeconomists 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) […]