The table below shows hypothetical data for five economies. Real GDP is measured in millions of dollars.

a. Fill in the missing data. Which economies have an inflationary gap? Which have a recessionary gap?

b. Which economies likely have the most unused capacity? Explain.

c. In which economies are labour and other factors of production in excess demand?

d. Explain why the rate of change of nominal wages is high in Economies 1 and 4 , and low in Economies 2 and 3 .

e. Assuming that labour productivity is constant, in which economies are unit costs rising? In which are they falling? Explain.

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Output Rate of Real GDP Potential GDP (Y) Gap Wage (% of Y*) Change Economy 1 10050 9100 +2.0% Economy 2 70000 77000 -0.3% Economy 3 115000 130000 -0.5% Economy 4 4000 3700 +1.0% Economy 5 50000 50000 0.0%