Question

Attempts: Average: 14 5. Real versus nominal GOP Consider a simple economy that produces two goods: cupcakes and erasers. The following table shows the prices and quantities of the goods over a three-year period Erasers Price Quantity (Number of cupcakes) 120 130 130 Price Year 2012 2013 2014 Quantity (Number of erasers) 195 195 145 (Dollars per cupcake) (Dollars per eraser) Use the information from the preceding table to fill in the following table Nominal GDP Year (Dollars)(Base year 2012, dolars GOP Deflator 2012 2013 2014 From 2013 to 2014, nominal GDP The inflation rate in 2014 was . Why is real GDP a more accurate measure of an economy's production than nominal GDP? ,and real GDP Real GDP does not include the value of intermediate goods and services, but nominal GDP does. 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. O Real GDPp is not influenced by price changes, but mominal GOP Grade i t Now Save & Continue Conenue wthout saving

Answer 1

Year	nominal gdp	real gdp	GDP deflator
2012	120+195=315	315	100
2013	260+780=1040	130+195=325	(1040/325)*=320
2014	520+580=1100	130+145=275	(1100/275)*100=400

GDP deflator = (nominal/real GdP)*100

From 2013 to 2014, nominal GDP​​​ rises , & real GDP rises..

Inflation rate in 2014 is = (400-320)/320 = 2.5

= 25%

MCQ :

Option c)

Real GDP is just deflated nominal GDP.

So real GDP is not influenced by price level , otherwise all components of nominal & real GDP are same