5. Real versus nominal GDPConsider a simple economy that produces two goods: cupcakes and muffins. The following table shows the prices and quantities of the goods over athree-year period.Year201620172018Year201620172018Price(Dollars per cupcake)24Nominal GDP(Dollars)2909604201CupcakesUse the information from the preceding table to fill in the following table.From 2017 to 2018, nominal GDPQuantity(Number of cupcakes)115150100The inflation rate in 2018 wasReal GDP(Base year 2016, dollars) GDP Deflator290Price(Dollars per muffin)5and real GDP2Muffins2Why is real GDP a more accurate measure of an economy's production than nominal GDP?Quantity(Number of muffins)175180O Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.O Real GDP includes the value of exports, but nominal GDP does not.Real GDP is not influenced by price changes, but nominal GDP is.160

The real GDP and Nominal Gross Domestic Product (GDP) would quantify the total value of all items…

Consider a simple economy that produces two goods: cupcakes and muffins. The following table shows the prices and quantities of the goods over a three-year period. Quantity Year (Dollars per cupcake) (Number of cupcakes) (Dollars per muffin) (Number of muffins) ITA 115 150 100 2016 2017 2018 Price Year 2016 2017 2018 2 Nominal GDP (Dollars) 290 960 420 4 1 Use the information from the preceding table to fill in the following table. Cupcakes Real GDP (Base year 2016, dollars) GDP Deflator 290 From 2017 to 2018, nominal GDP The inflation rate in 2018 was and real GDP Price 5 2 2 Muffins Why is real GDP a more accurate measure of an economy's production than nominal GDP? O Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not. Real GDP includes the value of exports, but nominal GDP does not. O Real GDP is not influenced by price changes, but nominal GDP is. Quantity 175 180 160

Consider a simple economy that produces two goods: cupcakes and muffins. The following table shows the prices and quantities of the goods over a three-year period. Quantity Year (Dollars per cupcake) (Number of cupcakes) (Dollars per muffin) (Number of muffins) ITA 115 150 100 2016 2017 2018 Price Year 2016 2017 2018 2 Nominal GDP (Dollars) 290 960 420 4 1 Use the information from the preceding table to fill in the following table. Cupcakes Real GDP (Base year 2016, dollars) GDP Deflator 290 From 2017 to 2018, nominal GDP The inflation rate in 2018 was and real GDP Price 5 2 2 Muffins Why is real GDP a more accurate measure of an economy's production than nominal GDP? O Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not. Real GDP includes the value of exports, but nominal GDP does not. O Real GDP is not influenced by price changes, but nominal GDP is. Quantity 175 180 160

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

5. Real versus nominal GDP
Consider a simple economy that produces two goods: cupcakes and muffins. The following table shows the prices and quantities of the goods over a
three-year period.
Year
2016
2017
2018
Year
2016
2017
2018
Price
(Dollars per cupcake)
2
4
Nominal GDP
(Dollars)
290
960
420
1
Cupcakes
Use the information from the preceding table to fill in the following table.
From 2017 to 2018, nominal GDP
Quantity
(Number of cupcakes)
115
150
100
The inflation rate in 2018 was
Real GDP
(Base year 2016, dollars) GDP Deflator
290
Price
(Dollars per muffin)
5
and real GDP
2
Muffins
2
Why is real GDP a more accurate measure of an economy's production than nominal GDP?
Quantity
(Number of muffins)
175
180
O Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.
O Real GDP includes the value of exports, but nominal GDP does not.
Real GDP is not influenced by price changes, but nominal GDP is.
160

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