10. Potential GDP (LAS) for the economy of Ithica is $1500. The aggregate demand and aggregate supply schedules are shown in the following table.

Aggregate Aggregate Price Quantity Quantity Index Demanded ($) Supplied ($)

90 1700 $950 95 1650 1150 100 1600 1300 105 1550 1420 110 1500 1500 115 1450 1540

a) What are the equilibrium values of price and real GDP?

What type of equilibrium is this?

b) Assume that an increase in productivity increases aggregate supply by $300. What will be the new equilibrium values of price and real GDP? Is there now a recessionary gap or an inflationary gap? How much is the gap?