Question: 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

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.

YearCupcakes

Muffins

PriceQuantityPriceQuantity(Dollars per cupcake)(Number of cupcakes)(Dollars per muffin)(Number of muffins)201611102150201721554215201831204180

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

YearNominal GDPReal GDPGDP Deflator(Dollars)(Base year 2016, dollars)201620172018

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?

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

Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.

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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