Hi all, Bit confused with EOC question 2 in reading 41. Looks like nominal sales was taken and multiplied by the real growth rate to obtain real 2012 sales? How does that make sense, shouldn’t we take real sales to forecast? Do I have the concept wrong? I searched for similar questions in this forum but couldn’t find, apologies if this is repetitive. Thanks!
Sales in 2008 is same in nominal terms and real terms. 2008 is the base year when there is no inflation: if multiply sales only by growth rate = you get real sales if multiply sales by growth rate and then inflation rate = you get nominal sales you can also calculate it like this: (if it helps you to understand it better) 7,671,000 *1.06*1.1*1.05*1.09*1.05*1.08*1.05*1.08 = 13,164,000
Ah its the base year, thanks! I feel silly!