The table below shows the aggregate demand and short-run aggregate supply schedules of a country in which potential GDP is $1050 billion :
Price level Real GDP demanded
(billions of 2005 dollars) Real GDP supplied in the short run (billions of 2005 dollars)
100 1150 1050
110 1100 1100
120 1050 1150
130 1000 1200
140 950 1250
150 900 1300
160 850 1350
a. Does the country have an inflationary gap or a recessionary gap and what is its magnitude ?
b. Explain the effects of an increase in consumer spending on the short-run macroeconomic equilibrium.
c. Explain the effects of an increase in business investment on the short-run macroeconomic equilibrium.
d. Explain the effects of an increase in exports on the short-run macroeconomic equilibrium.