Chained dollars

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Chained dollars is a method of adjusting real dollar amounts for inflation over time, so as to allow comparison of figures from different years.[1] The U.S. Department of Commerce introduced the chained-dollar measure in 1996. Chained dollars generally reflect dollar figures computed with 2009 as the base year.

Terms
Constant Dollars: weighted by a constant/unchanging basket/list of goods and services.
Chained Dollars: weighted by a basket/list that changes yearly to more accurately reflect actual spending. The basket is an average of the basket for successive pairs of years; example of paired years are 2010-2011, 2011-2012, etc.

The technique is so named because the second number in a pair of successive years becomes the first in the next pair. The result is a continuous "chain" of weights and averages.[2] The advantage of using the chained-dollar measure is that it is more closely related to any given period covered and is subject to less distortion over time.[3]

See also

References

  1. Mark McCracken, Definition of Chained dollars TeachMeFinance.com. Accessed 2009.05.11.
  2. U.S. Department of Energy, Chained Dollars, citing EIA, Annual Energy Review 1999.
  3. Mark McCracken, op. cit.

External links