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Consider a simple economy that produces two goods: cupcakes and erasers. The following table shows the prices and quantities
The inflation rate in 2020 was Why is real GDP a more accurate measure of an economys production than nominal GDP? Real GDP
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Answer #1

Base year 2018

Nominal GDP in 2018

=1*150+ 2*160

= 150+ 320

Nominal GDP in 2018=470$

Real GDP in 2018

=1*150+ 2*160

= 150+ 320

Real GDP in 2018=470$

GDP Deflator in 2018

GDP deflator= NominalGDP/Real GDP*100

= 470/470*100

=100

Nominal GDP in 2019

=2*135+4* 230

= 270+ 920

= 1190$

Real GDP in 2019

=1*135+2* 230

= 135+ 460

Real GDP in 2019= 595$

GDP Deflator in 2019

GDP deflator= NominalGDP/Real GDP*100

= 595/1190*100

=50

Nominal GDP in 2020

=3*110+4* 165

= 330+ 660

=990$

Real GDP in 2020

=1*110+2* 165

= 110+ 330

=440 $

GDP Deflator in 2020

GDP deflator= NominalGDP/Real GDP*100

= 440/990*100

=44.4

Part B) Real GDP is more accurate meassure ofnation production than nominal GDP because real GDP is not influenced by price changes , but nominal GDP is

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