Final answer:
The choice of base year for calculating Real GDP is significant as it affects the levels but not the growth rates of real GDP. Although levels vary with different base years, the growth trend remains the same, thus making the selection relevant for comparative analysis over time.
Step-by-step explanation:
When calculating Real GDP, the selection of the base year is indeed significant. The assertion that the year picked for the base year when calculating Real GDP is irrelevant because fundamental results remain unchanged is false. Real GDP is calculated by taking the quantities of goods and services produced in different years and multiplying them by their prices in the base year. This transforms nominal GDP figures into real terms, adjusting for inflation and providing a more accurate reflection of an economy's growth.
By choosing a different base year, the relative prices of goods and services may shift, which could affect the real GDP measure. However, it is essential to note that although the levels of real GDP may differ using different base years, the growth rates calculated over any period are consistent regardless of the base year selected. This consistency ensures that while the base year affects the level of real GDP, it does not impact the overall growth trend portrayed by the real GDP figures.
For instance, if we compare real GDP and nominal GDP for the base year, which could be 2005, they are the same because in the base year, the GDP deflator (or price index) always has a value of 100 by definition. Changing the base year would change the level of real GDP due to different prices but would not alter the economic growth measurement from one year to the next.