7. Real versus nominal values and correcting for inflation

Consider the following hypothetical economy with the following economic data.

Year	Nominal GDP	GDP Deflator
(Dollars)	(Dollars)
2010	$325	100
2011	$1,260	315
2012	$1,280	400

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

Hint: You will need to convert all the nominal values above into real 2010 dollars using the GDP deflator. Round your results to the nearest whole dollar when entering your answers.

Year	Real GDP
(Dollars)
(Base year 2010)
2010
2011
2012

From 2011 to 2012, nominal GDP , and real GDP .

The inflation rate in 2012 was .

Why is real GDP a more accurate measure of an economy's production than nominal 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.

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

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