Which of the following prices will be used when calculating the rate of growth of real GDP between the year's 2005 and 2006 using the chain method?
A)prices in the base year (2002)
B)prices in 2005
C)prices in 2006
D)the average of prices in 2005 and 2006
E) prices in 2005, 2006, and in 2002 (the base year)

Question

Quizplus · Accepted Answer

The chain method uses the average of prices in the current year and the previous year as the base for calculating the growth rate. Therefore, in calculating the rate of growth of real GDP between 2005 and 2006, we would use the average of prices in 2005 and 2006.

Which of the Following Prices Will Be Used When Calculating