The two-sided search model is consistent with which of the following business cycle facts?
A)The unemployment rate is countercyclical and the vacancy rate is acyclical.
B)The unemployment rate is countercyclical and the vacancy rate is countercyclical.
C)The unemployment rate is countercyclical and the vacancy rate is procyclical.
D)The unemployment rate is acyclical and the vacancy rate is procyclical.
E)The unemployment rate is procyclical and the vacancy rate is procyclical.

Question

Quizplus · Accepted Answer

The two-sided search model predicts that as the economy enters a recession, the unemployment rate will increase, which is countercyclical, while the vacancy rate will decrease, which is procyclical. Therefore, option C where the unemployment rate is countercyclical and the vacancy rate is procyclical is consistent with the two-sided search model.

The Two-Sided Search Model Is Consistent with Which of the Following