When calculating real GDP, the reference base year
A)always reduces the value of GDP compared to GNP.
B)allows us to increase the value of goods and services.
C)allows us to account for changes in GNP compared to GDP.
D)allows us to calculate the value of the goods and services in terms of prices of that base year.
E)usually increases the value of GNP compared to GDP.

Question

Quizplus · Accepted Answer

The reference base year is used to calculate real GDP by valuing goods and services at the prices of that base year, allowing for a comparison of economic output over time without the effects of inflation.

When Calculating Real GDP, the Reference Base Year