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Consider a simple economy that produces two goods: pens and erasers
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.
| Year | Pens | Erasers | ||
|---|---|---|---|---|
| Price | Quantity | Price | Quantity | |
| (Dollars per pen) | (Number of pens) | (Dollars per eraser) | (Number of erasers) | |
| 2015 | 1 | 115 | 1 | 165 |
| 2016 | 2 | 135 | 4 | 225 |
| 2017 | 4 | 100 | 4 | 175 |
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 does not include the value of intermediate goods and services, but nominal GDP does. Real GDP includes the value of exports, but nominal GDP does not. Real GDP is not influenced by price changes, but nominal GDP is.
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