Question

CENGAGE MINDTAP TI Saves Homework (Ch 10) Consider a simple economy that produces two goods: cupcakes and muffins. The following table shows the prices and quantities of the goods over a three-year period. * Cupcakes Price Quantity (Dollars per cupcake) (Number of cupcakes) 1 115 Year 2017 Muffins Price Quantity (Dollars per muffin) (Number of muffins) 2 175 2018 2 4 180 150 120 2019 4 4 190 Use the information from the preceding table to fill in the following table. Nominal GDP (Dollars) Real GDP (Base year 2017, dollars) Year GDP Deflator 2017 2018 2019 From 2018 to 2019. nominal GOP and real GOP The inflation rate in 2019 was Why is real GDP a more accurate measure of an economy production than nominal GDP? RLGDP dares matance the intermediate and secutaminando

Answer 1

Nominal GDP = Units of output * Price per unit

Real GDP = Units of output * Price per unit from Base Year

GDP Deflator = Nominal GDP / Real GDP * 100

Nominal GDP

2017 : 115*1 + 175*2 = 115 + 350

= 465

2018 : 150*2 + 180*4 = 300 + 720

= 1020

2019 : 120*4 + 190*4

= 480 + 760

= 1240

Real GDP

2017 : 115*1 + 175 *2

= 115 + 350

= 465

2018 : 150*1 +180*2

= 150 + 360

= 510

2019 : 120*1 + 190*2

= 120 + 380

= 500

GDP Deflator

2017 : 465 / 465 * 100

= 100%

2018 : 1020 / 510 * 100

= 200%

2019 : 1240 / 500 * 100

= 248%

Year	Nominal GDP	Real GDP	GDP Deflator
2017	465	465	100%
2018	1020	510	200%
2019	1240	500	248%

From 2018 to 2019, nominal GDP increases, and real GDP reduces.

The inflation rate in 2019 was 248%

Real GDP is a more accurate measure of an economy's production than nominal GDP , because

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