Consider a simple economy that produces two goods: pencils and erasers. The following table shows the prices and quantities of the goods over a three-year period. Year Pencils Erasers Price Quantity Price Quantity (Dollars per pencil) (Number of pencils) (Dollars per eraser) (Number of erasers) 2016 2 115 5 175 2017 4 150 2 180 2018 1 100 2 160 Use the information from the preceding table to fill in the following table. Year Nominal GDP Real GDP GDP Deflator (Dollars) (Base year 2016, dollars) 2016 2017 2018 From 2017 to 2018, nominal GDP , and real GDP . The inflation rate in 2018 was . Why is real GDP a more accurate measure of an economy's production than nominal GDP? Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not. Real GDP is not influenced by price changes, but nominal GDP is. Real GDP does not include the value of intermediate goods and services, but nominal GDP does.
Consider a simple economy that produces two goods: pencils and erasers. The following table shows the prices and quantities of the goods over a three-year period. Year Pencils Erasers Price Quantity Price Quantity (Dollars per pencil) (Number of pencils) (Dollars per eraser) (Number of erasers) 2016 2 115 5 175 2017 4 150 2 180 2018 1 100 2 160 Use the information from the preceding table to fill in the following table. Year Nominal GDP Real GDP GDP Deflator (Dollars) (Base year 2016, dollars) 2016 2017 2018 From 2017 to 2018, nominal GDP , and real GDP . The inflation rate in 2018 was . Why is real GDP a more accurate measure of an economy's production than nominal GDP? Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not. Real GDP is not influenced by price changes, but nominal GDP is. Real GDP does not include the value of intermediate goods and services, but nominal GDP does.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Consider a simple economy that produces two goods: pencils and erasers. The following table shows the prices and quantities of the goods over a three-year period.
|
Year
|
Pencils
|
Erasers
|
||
|---|---|---|---|---|
|
Price
|
Quantity
|
Price
|
Quantity
|
|
|
(Dollars per pencil)
|
(Number of pencils)
|
(Dollars per eraser)
|
(Number of erasers)
|
|
| 2016 | 2 | 115 | 5 | 175 |
| 2017 | 4 | 150 | 2 | 180 |
| 2018 | 1 | 100 | 2 | 160 |
Use the information from the preceding table to fill in the following table.
|
Year
|
Nominal
|
Real GDP
|
GDP Deflator
|
|---|---|---|---|
|
(Dollars)
|
(Base year 2016, dollars)
|
||
| 2016 |
|
|
|
| 2017 |
|
|
|
| 2018 |
|
|
|
From 2017 to 2018, nominal GDP , and real GDP .
The inflation rate in 2018 was .
Why is real GDP a more accurate measure of an economy's production than nominal GDP?
Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.
Real GDP is not influenced by price changes, but nominal GDP is.
Real GDP does not include the value of intermediate goods and services, but nominal GDP does.
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