Blank 1: Decreased or Increased Blank 2: Decreased or Increased Blank 3: -23.1%,

Question

Blank 1: Decreased or Increased

Blank 2: Decreased or Increased

Blank 3: -23.1%, -.2%, 23.1%, 76.9%, or 130%

Consider a simple economy that produces two goods: pens and erasers. The following table shows the prices and quantities of the goods over a three year period Pens Erasers Price Quantity (Number of pens) 125 135 125 Price Year 2012 2013 2014 Quantity (Number of erasers) 155 210 165 (Dollars per pen) (Dollars per eraser) 4 2 Use the information from the preceding table to fill in the following table Nominal GD Real GDP Year(Dollars) 2012 2013 2014 (Base year 2012, dollars) GDP Deflator From 2013 to 2014, nominal GDP and real GDP The inflation rate in 2014 was 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 does not include the value of intermediate goods and services, but nominal GDP does Real GDP is not influenced by price changes, but nominal GDP is

Explanation / Answer

Nominal gdp

2012 2013 2014

745

Nominal gdp growth rate=change in gdp ÷previous year gdp×100

2012=there is no change=715÷715×100=0%

2013=1170-715÷715×100=63.63%

2014=745-1170÷1170×100=-36.32%

BLANK1:DECREASED (FROM 2013-14)

Real gdp ( base year 2012)

2012 2013 2014

Real gdp 2012=change in gdp÷base year×100

=715÷715×100=0%(there is no change)

2013=185÷715÷100=25.87%

2014=-155÷715×100=-21.67%

BLANK2:DECREASED (FROM2013-14)

Gdp deflator=nominal gdp÷real gdp×100

2012 =715÷715×100=100%

2013=1170÷900×100=130%

2014= 745÷745×100 =100%

INFLATION RATE FOR 2014=GDP2-GDP1÷GDP1×100=100-130÷130×100=-23.1%

BLANK 3:-23.1%

REAL GDP IS NOT INFLUENCED BY PRICE CHANGE,BUT NOMINAL GDP IS (because real gdp increase due to increade in production on other hand nominal gdp increase due to increase in production of price or both.so,real gdp is reglect true and better indicator of economic development.

Quantity price gdp quantity price gdp quantity price gdp Pens 125 2 250 135 4 540 125 2 250 Erase 155 3 465 210 3 630 165 3 495 Total 715 1170

745

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