Answer:
The base year being used to calculate the price index for this economy is;
Year 3.
Explanation:
The gross domestic product (GDP) can be defined as the total quantity of goods produced in an economy during a certain time period. It is often measure annually. It can also be defined as the monetary value of all the goods and services produced in an economy during a certain period in time. The GDP has always been used to measure how fast a country's economy is growing. There are two major types of GDP, namely; nominal GDP and real GDP. The major difference between nominal GDP and real GDP is that the real GDP accounts for inflation while the former does not consider inflation. It is therefor clear that the real GDP gives a broader picture of growth than the nominal GDP. Another term involved when dealing with GDP is the base year.
The base year can be defined as the year in which the real GDP is equal to the nominal GDP. In our case, the base year will be year 3 since this is the year when the real GDP is equal to the nominal GDP.
