Final answer:
Examining economic welfare with GDP deflator, nominal GDP, and Real GDP is necessary to adjust for inflation and gain a clear picture of a nation's economic performance and standards of living. Real GDP is especially critical for accurate economic comparison over time and between countries.
Step-by-step explanation:
When examining the economic welfare of Goodland Republic in 2018, we look at indicators like the GDP deflator, nominal GDP, and Real GDP. Nominal GDP measures the value of goods and services produced at current market prices, while Real GDP adjusts this figure to account for inflation, providing a more accurate reflection of economic growth and true economic welfare.
Converting nominal GDP to Real GDP involves using the GDP deflator, which is an index that reflects the changes in price level. Inflation can distort economic measurements, making Real GDP a necessary calculation to truly understand economic performance. For instance, if nominal GDP increased but the GDP deflator also increased substantially, it could mean that the rise in GDP is mainly due to inflation rather than an actual increase in production.
Calculating Real GDP allows us to compare the economic welfare across different periods and nations with more precision. When comparing nations, converting GDP to a common currency using exchange rates allows for more accurate comparisons. Similarly, computing GDP per capita, taking into account population data, gives us a rough estimate of a nation's standard of living. Therefore, for a clear picture of Goodland Republic's economic welfare, the Real GDP value, which controls for price level changes, is of paramount importance.