ECO100Y1 Lecture : Q1 Substitutes (Easy)
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Consider a simple economy that only produces two goods; apples and oranges. The following table shows prices and quantities over a 3 year period.
Ā |
Price of |
Quantity of |
Price of |
Quantity of |
YEAR |
Apples |
Apples |
Oranges |
Oranges |
2012 |
2 |
20 |
1 |
10 |
2013 |
3 |
24 |
2 |
12 |
2014 |
4 |
30 |
3 |
20 |
Use the information from the previous table to fill out the following table:
Ā | Ā |
Real GDP |
GDP |
YEAR |
Nominal GDP ($) |
(The base year 2012)($) |
Deflator |
2012 |
Ā | Ā | Ā |
2013 |
Ā | Ā | Ā |
2014 |
Ā | Ā | Ā |
Choose one from each:
From 2013 to 2014, nominal GDP (increased or decreased) and real GDP (increased or decreased).
The inflation rate in 2014 was (10%, 40.6%, 29.4%, -28.9%, or -9.1%).
Why is real GDP a more accurate measure of an economyĆ¢ĀĀs production than nominal GDP?