Consider a simple economy that produces two goods: pencils and oranges. The following table shows the prices and quantities of the goods over a three-year period. Pencils Oranges Price Price Quantity Quantity (Dollars per pencil) (Number of pencils) (Dollars per orange) (Number of oranges) Year 2016 125 1 200 2017 2 170 230 2018 4 150 4 170 Use the information from the preceding table to fill in the following table. Real GDP Nominal GDP (Dollars) (Base year 2016, dollars) GDP Deflator Year 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? Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes. Real GDP does not include the value of intermediate goods and services, but nominal GDP does. Real GDP is not influenced by price changes, but nominal GDP is.

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Chapter1: Making Economics Decisions
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Consider a simple economy that produces two goods: pencils and oranges. The following table shows the prices and quantities of the goods over a
three-year period.
Pencils
Oranges
Price
Price
Quantity
Quantity
(Dollars per pencil)
(Number of pencils)
(Dollars per orange)
(Number of oranges)
Year
2016
125
1
200
2017
2
170
230
2018
4
150
4
170
Use the information from the preceding table to fill in the following table.
Real GDP
Nominal GDP
(Dollars)
(Base year 2016, dollars)
GDP Deflator
Year
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?
Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and
services an economy consumes.
Real GDP does not include the value of intermediate goods and services, but nominal GDP does.
Real GDP is not influenced by price changes, but nominal GDP is.
Transcribed Image Text:Consider a simple economy that produces two goods: pencils and oranges. The following table shows the prices and quantities of the goods over a three-year period. Pencils Oranges Price Price Quantity Quantity (Dollars per pencil) (Number of pencils) (Dollars per orange) (Number of oranges) Year 2016 125 1 200 2017 2 170 230 2018 4 150 4 170 Use the information from the preceding table to fill in the following table. Real GDP Nominal GDP (Dollars) (Base year 2016, dollars) GDP Deflator Year 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? Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes. Real GDP does not include the value of intermediate goods and services, but nominal GDP does. Real GDP is not influenced by price changes, but nominal GDP is.
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