Question

Look back at Table $8-3$, which explains how to calculate real GDP in terms of $2009$constant dollars. Change the base year to$2007$. Recalculate the price index, and then recalculate real GDP-that is, express column$4$of Table 8-3 in terms of $2007$dollars instead of $2009$dollars.

Short answer

The values of Real GDP are lower than those in the preceding column.

Step-by-step solution

    Introduction

Nominal GDP is the dollar value of GDP calculated using current market values and expressed in current year prices. The term "real GDP" refers to nominal GDP after inflation adjustment. To calculate real GDP, multiply nominal GDP by the price index.

    Taking the base year as 2009

Includes the same information The second column displays the nominal GDP at current prices. Real GDP is calculated in the same way. $2009$as the base year.

$Table1$

The real GDP is calculated in the last column using $2005$as the base year. Observe that when the base year is $2005$, Real GDP values are lower than those in the preceding column.