Inflation rate AS AD graph labor growth and the AD multiplier economics homework help

1) A) Why would you expect the inflation rate to increase if the actual unemployment rate declined to a level lower than the “full employment” unemployment rate (NAIRU) and remained at that low level for a year or longer?  Explain your answer in a few sentences.  4pts

B) Draw an AS/AD diagram illustrating AD and AS shifts that result in a significant increase in the GDP Deflator when AD growth pushes the actual Urate below the level consistent with full employment. Be sure to label all lines and axes in your diagram clearly. 

2) Donald Trump has claimed that slashing a variety of regulations on business behavior together with the tax cuts on corporations and on capital gains that he will propose will result in REAL GDP growth of at least 4% per year. (RGDP growth in the Obama years only averaged 2% per year).

If population growth is only .5% per year in the US and immigration is sharply restricted as Trump also proposes, what rate of labor productivity growth is needed to achieve 4% real growth in GDP? 

3)
  Most Northern European countries have a larger % of imports in their retail sales than the US balanced by a larger share of exports in their RGDP. They also have higher marginal tax rates and higher levels of government transfer spending on safety net programs and on government provided medical care than the US.  Explain in detail how these differences affect the size of the Aggregate Demand “Multiplier” in these European countries relative to the US AD Multiplier.  (No exact absolute value for the multiplier is required in your answer.) 

 

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