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2. Consider a version of the labor market model of Pissarides (1985) in which the matching function M(u, v) is uv M(u, v) u + v and the discount factor B is one. (a) Derive an expression for the worker's job-finding probability p(0) and for the firm's worker-finding (or job-filling) probability, q@). (b) Express the equilibrium market tightness in terms of the parameters of the model, k, 8, 7, 6, and y. (e) Express the equilibrium unemployment u* in terms of the parameters of the model. (d) Compute the effect of a small increase in the productivity of labor y on the equilibrium market tightness 0. Explain your findings. (e) Compute the effect of a small increase in the productivity of labor y on the equilibrium unem- ployment. Explain your findings. 2. Consider a version of the labor market model of Pissarides (1985) in which the matching function M(u, v) is uv M(u, v) u + v and the discount factor B is one. (a) Derive an expression for the worker's job-finding probability p(0) and for the firm's worker-finding (or job-filling) probability, q@). (b) Express the equilibrium market tightness in terms of the parameters of the model, k, 8, 7, 6, and y. (e) Express the equilibrium unemployment u* in terms of the parameters of the model. (d) Compute the effect of a small increase in the productivity of labor y on the equilibrium market tightness 0. Explain your findings. (e) Compute the effect of a small increase in the productivity of labor y on the equilibrium unem- ployment. Explain your findings

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