question archive Consider a simple economy that produces two goods: pens and erasers

Consider a simple economy that produces two goods: pens and erasers

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Consider a simple economy that produces two goods: pens and erasers. The following table shows the prices and quantities of the goods over a three-year period.

Year

Pens

Erasers

Price

Quantity

Price

Quantity

(Dollars per pen)

(Number of pens)

(Dollars per eraser)

(Number of erasers)

201811201195201921304195202041304145

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?

Real GDP includes the value of exports, but nominal GDP does 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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