Year 2018 2019 2020 (Dollars) EM (Base year 2018, dollars) From 2019 to 2020, nominal GDP The inflation rate in 2020 was GDP Deflator UQ and real GDP 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 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.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Consider a simple economy that produces two goods: plastic cups and seltzers. The following table shows the prices and quantities of the goods over a
three-year period.
2019
2020
Price
Quantity
Price
Quantity
Year (Dollars per plastic cup) (Number of plastic cups) (Dollars per seltzer) (Number of seltzers)
2018
2
180
4
210
4
160
Year
2018
2
2
4
2019
2020
Use the information from the preceding table to fill in the following table.
Nominal GDP
Real GDP
(Dollars) (Base year 2018, dollars) GDP Deflator
Plastic cups
From 2019 to 2020, nominal GDP
The inflation rate in 2020 was
295
140
145
and real GDP
Seltzers
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 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.
Transcribed Image Text:Consider a simple economy that produces two goods: plastic cups and seltzers. The following table shows the prices and quantities of the goods over a three-year period. 2019 2020 Price Quantity Price Quantity Year (Dollars per plastic cup) (Number of plastic cups) (Dollars per seltzer) (Number of seltzers) 2018 2 180 4 210 4 160 Year 2018 2 2 4 2019 2020 Use the information from the preceding table to fill in the following table. Nominal GDP Real GDP (Dollars) (Base year 2018, dollars) GDP Deflator Plastic cups From 2019 to 2020, nominal GDP The inflation rate in 2020 was 295 140 145 and real GDP Seltzers 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 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.
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