Consider a simple economy that produces two goods: pens and muffins. The following table shows the...

   
 

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Consider a simple economy that produces two goods: pens and muffins. The following table shows the prices and quantities of the goods over a three- year period. Pens Muffins Price Quantity Price Quantity Year (Dollars per pen) (Number of pens) (Dollars per muffin) (Number of muffins) 2014 1 130 2 180 2015 2 150 4 200 2016 110 4 165 Use the information from the preceding table to fill in the following table. Nominal GDP Real GDP Year (Dollars) (Base year 2014, dollars) GDP Deflator 2014 2015 2016 3. decreased decreased From 2015 to 2016, nominal GDP and real GDP increased increased The inflation rate in 2016 was -12.5% 0.1% 12.5% 88.9% 112.5% 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. Real GDP includes the value of exports, but nominal GDP does not. Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not. Consider a simple economy that produces two goods: pens and muffins. The following table shows the prices and quantities of the goods over a three- year period. Pens Muffins Price Quantity Price Quantity Year (Dollars per pen) (Number of pens) (Dollars per muffin) (Number of muffins) 2014 1 130 2 180 2015 2 150 4 200 2016 110 4 165 Use the information from the preceding table to fill in the following table. Nominal GDP Real GDP Year (Dollars) (Base year 2014, dollars) GDP Deflator 2014 2015 2016 3. decreased decreased From 2015 to 2016, nominal GDP and real GDP increased increased The inflation rate in 2016 was -12.5% 0.1% 12.5% 88.9% 112.5% 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. Real GDP includes the value of exports, but nominal GDP does not. Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.

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