Consider a simple economy that produces two goods: apples and muffins. The following table shows the prices and quantities of the goods over a three-year period.YearApplesMuffinsPriceQuantityPriceQuantity(Dollars per apple)(Number of apples)(Dollars per muffin)(Number of muffins)201811502160201921354230202031104165 Use the information from the preceding table to fill in the following table.YearNominal GDPReal GDPGDP Deflator(Dollars)(Base year 2018, dollars)2018 2019 2020 From 2019 to 2020, nominal GDP , and real GDP . The inflation rate in 2020 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 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.

nominal GDP measures the value of good at current prices. real GDP measures the value of good at…

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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: apples and muffins. The following table shows the prices and quantities of the goods over a three-year period.

Year	Apples	Muffins
Price	Quantity	Price	Quantity
(Dollars per apple)	(Number of apples)	(Dollars per muffin)	(Number of muffins)
2018	1	150	2	160
2019	2	135	4	230
2020	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 2018, dollars)
2018
2019
2020

From 2019 to 2020, nominal GDP , and real GDP .

The inflation rate in 2020 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 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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