Final answer:
The base year in comparing nominal versus real GDP is a reference year for price comparisons, used to adjust for inflation and provide a constant measure of economic productivity over time. The real GDP is calculated by pricing goods and services produced in different years in the prices of the base year.
Step-by-step explanation:
The base year in the context of comparing nominal GDP and real GDP represents a reference year used for price comparisons, which is option (c) A reference year used for price comparisons. Real GDP accounts for inflation by using the prices from the base year to calculate the value of goods and services produced in different years. This measure allows economists and analysts to compare economic productivity over time without the distortions caused by changes in price levels.
For instance, in this example, the year 2005 is used as the base year to convert nominal GDP into real GDP. Since all goods and services produced in different years are priced at 2005 levels, real GDP is often expressed in terms such as "Constant Dollars" or "2005 Dollars." Notably, in the base year itself, the real and nominal GDP figures are the same, as the price index is set at 100 by definition.