Please help:

If the rate of separation is 0.02 and the rate of job finding is 0.08 but the current unemployment rate is 0.10, then the current unemployment rate is __ the equilibrium rate, and in the next period it will move __ the equilibrium rate.

a) above; toward
b) above; away from
c) below; toward
d) below; away from

THANKS

To determine the relationship between the current unemployment rate and the equilibrium rate, we need to compare the rates of separation and job finding.

The equilibrium rate occurs when the rate of separation is equal to the rate of job finding. Thus, the equilibrium rate in this scenario is the point where both rates are the same.

Given that the rate of separation is 0.02 and the rate of job finding is 0.08, we can see that the rate of job finding is higher than the rate of separation. This means that the economy is creating more jobs than people are losing, which will eventually lower the unemployment rate.

Now, comparing the current unemployment rate of 0.10 to the equilibrium rate, we can conclude that the current unemployment rate is above the equilibrium rate. This is because the current rate of unemployment is higher than what would be achieved if the rate of separation and job finding were equal.

Regarding the movement of the unemployment rate in the next period, we need to look at whether the current rate is moving toward or away from the equilibrium rate. In this case, since the current unemployment rate is above the equilibrium rate, the next movement would be toward the equilibrium rate as the economy creates more jobs and reduces unemployment.

Therefore, the correct answer is:

a) above; toward