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

Year

Apples

Oranges

Price

Quantity

Price

Quantity

(Dollars per apple)

(Number of apples)

(Dollars per orange)

(Number of oranges)

2012 2 125 3 155
2013 4 135 3 210
2014 2 125 3 165
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
Points:

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Explanation:

From 2013 to 2014, nominal GDP selector 1

decreased

increased

, and real GDP selector 2

decreased

increased

.

Points:

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Explanation:

The inflation rate in 2014 was selector 1

-23.1%

-0.2%

23.1%

76.9%

130%

.

Points:

Close Explanation

Explanation:

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 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.