Consider a simple economy that produces two goods: pens and muffins. The following table shows the prices and quantities of the goods over a three-year period.YearPensMuffinsPriceQuantityPriceQuantity(Dollars per pen)(Number of pens)(Dollars per muffin)(Number of muffins)201611502160201721354230201831104165 Use the information from the preceding table to fill in the following table.YearNominal GDPReal GDPGDP 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?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 is not influenced by price changes, but nominal GDP is. Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.

GDP measures the market value of all goods and services produced in an economy within a given period…

Answered: Consider a simple economy that produces…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a simple economy that produces two goods: pens and muffins. The following table shows the prices and quantities of the goods over a three-year period.

Year	Pens	Muffins
Price	Quantity	Price	Quantity
(Dollars per pen)	(Number of pens)	(Dollars per muffin)	(Number of muffins)
2016	1	150	2	160
2017	2	135	4	230
2018	3	110	4	165

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?

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 is not influenced by price changes, but nominal GDP is.

Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.

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