(a) Using a graph showing aggregate demand, short-run aggregate supply, and long-run aggregate supply, illustrate an economy that faces an inflationary gap. 
(b) Explain how the inflationary gap can be eliminated and evaluate the possibilities.
Definitions:
Tax Laws
The legal rules and regulations governing how individuals and entities are taxed by governmental authorities.
Loanable Funds Traded
The marketplace for borrowing and lending, where loanable funds are exchanged, often involving financial institutions, with rates influenced by supply and demand.
Interest Rate
Borrowers face a cost, expressed as a percentage of the fundamental amount, for the privilege of using lenders' assets.
Supply of Loanable Funds
The total amount of funds available for borrowing in the economy, influenced by savings, government policies, and financial institutions.
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