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In Japan, potential GDP is 600 trillion yen and the table shows the aggregate demand and short-run aggregate supply schedules.
Real GDP Demanded Real GDP Supplied in the Short RunPrice Level (trillions of 2000 yen) (trillions of 2000 yen)75 600 40085 550 45095 500 500105 450 550115 400 600125 350 650135 300 700
a. Draw a graph of the aggregate demand curve and the short-run aggregate supply curve.
b. What is the short-run equilibrium real GDP and price level?
c. Does Japan have an inflationary gap or a recessionary gap and what is its magnitude?
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