(a) Suppose that in the Shapiro–Stiglitz model, unemployed workers are hired according to how long they have been unemployed rather than at random; specifically, suppose that workers who have been unemployed the longest are hired first. Consider a steady state where there is no shirking. Derive an expression for how long it takes a worker who becomes unemployed to get a job as a function of b, L, N, and L.

2) Compare and contrast Balassa Samuelson and Dornbusch overshooting models’ theory of exchange rate determination