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Question Description
1) Read the preliminary study on the gap between the official unemployment rate (U3) andthe broader definition of unemployment (U6) by Professor John Komlos. You will find thepaper on the course website in the folder “Problem Set 3”. After reading this paperanswer the following questions:a) In one or two paragraphs, explain the main results of this study.b) Check the Bureau of Labor Statistics website and report the most recent (Sept.2019) unemployment measures U3 and U6 (seasonally adjusted). Did theyincrease or decrease with respect to the same month of 2018?
2) Consider the data in the Table below, which shows the relevant data for six firms’ stocks:GE, Apple, Bank of America, Exxon, Pfizer, and Home Depot. is the return (in %) of arisk-free asset and ∆ ⁄ is the growth rate of the stock price (in %). Additionally, thetable has the current market price of each stock ( ).Use the stock price arbitrage equation (equation 9 from the lecture on investment) tocalculate the no-arbitrage price of each stock ( ∗) at which you would be indifferentbetween investing in the risk-free asset and investing in the stock. Given your answer,should you buy the stock or put the money into a safe asset? Justify your answer.[Hint: you may want to compare ∗ and . Notice that the risk-free return and the growth rateof stock prices are expressed in percentage!]Table: Relevant Stock DataFirm Dividend ∆ ⁄ GE 0.38 4.2 3.18 32.1Apple 2.03 4.2 2.04 106.1Bank of America 0.2 4.2 3.4 15.9Exxon 0.75 4.2 3 87.5Pfizer 1.12 4.2 1.5 35.7Home Depot 1.78 4.2 3.01 135Source: Morningstar
3) Consider the basic Neoclassical model. Graphically analyze the effects of:a) An exogenous increase in the current level government spending ( ).b) An exogenous increase in the future level of productivity ( +1).c) An exogenous increase in money supply ( )In each case, clearly describe how each endogenous variable changes.

All problems are covered in GLS Chapter 17-21, Problem 1 need to use Komlos U6 and U3.

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