GP

1. The textbook in chapter 8 coverage explains that inflation results from a demand side coordination failure between saving and investment. At the time of the article we had unemployment below its natural rate suggesting a booming economy. What would this suggest would be the expected relationship between saving and investment? Explain

2. The article explains that even though conditions look ripe for high levels of inflation we still had lower than expected inflation, what were the reasons advanced for this?

3. Suppose you are told President Trump’s economic policies ensured that we had a continued economic expansion with especially muted inflation, defend this position or argue against it based on what you have learned so far about aggregate demand and inflation and allude to information provided in the article.