In Japan, potential GDP is 600 trillion yen and the table shows the aggregate demand and short-run aggregate supply schedules:

Price Level Real GDP demanded(trillions of 2009 yen) Real GDP supplied in the short run (trillions of 2009 yen)

75 600 400

85 550 450

95 500 500

105 450 550

115 400 600

125 350 650

135 300 700

(a) (i) Draw a graph of the aggregate demand curve and the short-run aggregate supply curve.

(ii) What is the short-run equilibrium real GDP and price level?

(b)Does Japan have an inflationary gap or recessionary gap and what is its magnitude?