Suppose we switch the base year from 2000 to 2008.This change in the base year 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

Switching the base year affects the calculation of real GDP, as it changes the prices used to value goods and services. However, nominal GDP is calculated using current year prices and is not affected by the choice of base year. Therefore, changing the base year does not impact nominal GDP, nor does it directly cause real GDP to decrease in every year; it simply recalibrates the constant prices used for comparison.

Suppose We Switch the Base Year from 2000 to 2008