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In: Economics

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

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.

Year

Cupcakes

Muffins

Price Quantity Price Quantity
(Dollars per cupcake) (Number of cupcakes) (Dollars per muffin) (Number of muffins)
2012 1 120 1 195
2013 2 130 4 195
2014 4 130 4 145

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

Year Nominal GDP Real GDP GDP Deflator
(Dollars) (Base year 2012, dollars)
2012 ----- ------ -----
2013 ----- ------ -----
2014 ----- ------ -----

From 2013 to 2014, nominal GDP _______(decreased/increased), and real GDP_____ decreased/increased).

The inflation rate in 2014 was .----

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

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

b.)Real GDP does not include the value of intermediate goods and services, but nominal GDP does.

c.)Real GDP includes the value of exports, but nominal GDP does not.

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