2 . Real versus nominal GDP

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

Year	Cupcakes	Erasers
Price	Quantity	Price	Quantity
(Dollars per cupcake)	(Number of cupcakes)	(Dollars per eraser)	(Number of erasers)
2015	1	110	2	185
2016	2	155	4	200
2017	3	110	4	165

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

Year	Nominal GDP	Real GDP	GDP Deflator
(Dollars)	(Base year 2015, dollars)
2015
2016
2017

From 2016 to 2017, nominal GDP , and real GDP .

The inflation rate in 2017 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.

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.