The fixed-weighted (1987) index understated real GDP annual growth for 1929–87 by 0.4 percentage point; use of the chain index raises the long-term growth rate from 3.0 percent to 3.4 percent. The growth rate from 1987 to 1994—the last full year for which BEA prepared fixed (1987) weighted estimates—was reduced from 2.4 percent to 2.3 percent. The solid line is calculated using a chain-weighted index, the method currently used by the U.S. Department of Commerce in the National Income and Product Accounts (NIPA); the dashed line is calculated using a fixed-weighted index, the method NIPA statisticians used up to 1997. The first thing that we note is that the chain-weighted method gives us a lower measure of inflation. In 2007, the chain-weighted method measures inflation almost 1% lower th an the standard method, while at the same time measuring Real GDP as a higher number. So under the chain-weighted method, real GDP growth is higher, and inflation is lower. The chain-weighted output index method of measuring real GDP is based on 1) Valuing the quantities of goods produced in consecutive years using prices in both years and then averaging the percentage changes in the value of output is part of the _____ method of calculating real GDP. It is possible to demonstrate that the chain-weight index is also very close to an ideal index (see assignment for Figure 3). In row 13, enter a formula to calculate the real chain-weight growth rate of output for year 2 using the equation above and the Excel SQRT square-root function. Chain Base Method In this method, there is no fixed base period; the year immediately preceding the one for which the price index has to be calculated is assumed as the base year. Thus, for the year 1994 the base year would be 1993, for 1993 it would be 1992, for 1992 it would be 1991, and so on.

The chain-weighted output index method of calculating real GDP compares The quantities of goods produced in consecutive years using prices in both years and averaging the percentage changes in the value of outputs

It is possible to demonstrate that the chain-weight index is also very close to an ideal index (see assignment for Figure 3). In row 13, enter a formula to calculate the real chain-weight growth rate of output for year 2 using the equation above and the Excel SQRT square-root function. Chain Base Method In this method, there is no fixed base period; the year immediately preceding the one for which the price index has to be calculated is assumed as the base year. Thus, for the year 1994 the base year would be 1993, for 1993 it would be 1992, for 1992 it would be 1991, and so on. year 1 chain-weighted GDP equals nominal GDP equals $30,000.Year 2 chain-weighted real GDP is equal to (1.23496×$30,000) = $37,049, approximately. c) To calculate the implicit GDP deflator, we divide nominal GDP by real GDP, and then multiply by 100 to express as an index number. With year 1 as the base year, base year nominal GDP equals base

2 Aug 2002 The solid line is calculated using a chain-weighted index, the method by construction, the real chain-weighted outputs sum to equal GDP 

A price index is a normalized average (typically a weighted average) of price relatives for a Comparisons of output between countries often use Lowe quantity indexes. The Geary-Khamis method used in the World Bank's International 

The first thing that we note is that the chain-weighted method gives us a lower measure of inflation. In 2007, the chain-weighted method measures inflation almost 1% lower th an the standard method, while at the same time measuring Real GDP as a higher number. So under the chain-weighted method, real GDP growth is higher, and inflation is lower.

Under chain weights, a computer in 1995 is worth the average, or chain, of what it cost to buy it in 1994 and 1995. The advantage of the chain-weighting system is that it avoids the rewrites of economic history that come under the benchmark year (fixed-weight) system. The chained weighted measure gives the exact weighting of goods produced in that year. In other words, with a fixed weight method of calculating real GDP, the weighting of different goods can become outdated. A chain-weighted measure tries to avoid this by always measuring the output of the particular year. A consistent approach to chain-linking has to be taken for the quarterly national accounts and short-term volume indicators (such as the Index of Production, Output in the Construction Industry, the Index of Services, and the Retail Sales Index), in order to ensure consistency between the different series.

1 Feb 2012 In 2007, the chain-weighted method measures inflation almost 1% lower than the standard method, while at the same time measuring Real GDP 

In the chain index the weights are changed in principle in each calculation and the weight structure of the index is changed whenever the year changes. Thus demand falls even further leading to further reductions in output. FROM A FIXED-WEIGHT TO A CHAIN-WEIGHT METHOD OF MEASURING GDP. 2. Difference between the two indexes: the CPI uses date 1 quantities while the GDP 

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