2 . Real versus nominal GDP

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

Year	Apples	Muffins
Price	Quantity	Price	Quantity
(Dollars per apple)	(Number of apples)	(Dollars per muffin)	(Number of muffins)
2016	1	150	2	160
2017	2	135	4	230
2018	3	110	4	165

Use the information from the preceding table to fill in the following table.

Year	Nominal GDP	Real GDP	GDP Deflator
(Dollars)	(Base year 2016, dollars)
2016
2017
2018

From 2017 to 2018, nominal GDP , and real GDP .

The inflation rate in 2018 was .

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 does not include the value of intermediate goods and services, but nominal GDP does