2. (LO 4) Assume that the potential GDP (LAS) of the economy of Arion is $1000 and that the aggregate demand and the aggregate supply are as shown in Table 5.2

a) What is the value of equilibrium real GDP and the price level? Is there a recessionary gap or an inflationary gap?
Real GDP: Price level:
(Recessionary/inflationary)
gap of $

b) If firms become more optimistic and aggregate demand increases by $65, complete the aggregate demand 2 column in Table 5.2.

c) What will be the new values of equilibrium real GDP and the price level?
Real GDP: Price level:

d) Is there a recessionary gap or an inflationary gap?
What is the size of the gap?
(Recessionary/inflationary)
gap of $