Suppose government officials decide to change the base year to a more recent year . A change in the base year such as this will cause:
A) nominal GDP in every year to increase.
B) nominal GDP in every year to decrease.
C) both nominal and real GDP in every year to decrease.
D) real GDP in every year to decrease.
E) None of the above.

Question

Quizplus · Accepted Answer

Changing the base year does not affect the actual production of goods and services or their market value. Therefore, it does not affect the real GDP or nominal GDP in every year. Rather, it only affects the calculation of the price index and the inflation rate, which are used to adjust nominal GDP into real GDP. Therefore, the answer is none of the above.

Suppose Government Officials Decide to Change the Base Year to a More