What is chained dollars

Highlights of this article include the following:. Download as PDF. Highlights of this article include the following: Chain-weighted indexes have provided a more accurate picture of the current economic recovery than fixed-weighted indexes. Real GDP as measured by the chain-weighted index has grown at a 2. Because the chain-type indexes are weighted using current-period prices, the current-dollar shares of GDP provide a more accurate measure of the relative importance of components and are preferable to chained-dollar shares.

Thus, chained-dollar estimates can be used to compute "real" i. However, comparisons of two or more different chained-dollar series must be made with caution, because the prices used as weights in the chained-dollar calculations usually differ from the prices in the reference period, and the resulting chained-dollar values for detailed GDP components usually do not sum to the chained-dollar estimate of GDP or to any intermediate aggregate.

A measure of the extent of such differences is provided in most chained-dollar tables by a "residual" line, which indicates the difference between GDP or another major aggregate and the sum of the most detailed components in the table.

It is usually best to make comparisons of aggregate series in current dollars or to use BEA''s estimates of contributions to percent change. Chained dollar series are calculated as the product of the chain-type quantity index and the current-dollar value of the corresponding series, divided by The market value of goods and services purchased by U.

Consequently, real GDP provides a more accurate portrait of economic growth than nominal GDP because it uses constant prices, making comparisons between years more meaningful by allowing for comparisons of the actual volume of goods and services without considering inflation.

Current-dollar GDP decreased 2. Despite a 7. Economists traditionally use gross domestic product GDP to measure economic progress. If GDP is rising, the economy is in solid shape, and the nation is moving forward. On the other hand, if gross domestic product is falling, the economy might be in trouble, and the nation is losing ground. In general, a bad economy usually means lower earnings for companies. An increasing GDP is often seen as a measure of welfare and economic success.

However, it fails to account for the multi-dimensional nature of development or the inherent short-comings of capitalism, which tends to concentrate income and, thus, power.

One supposed flaw within GDP calculations is that measuring solely by price inherently undervalues certain products by discounting their contributions to overall productivity and standards of living.

GDP is an accurate indicator of the size of an economy and the GDP growth rate is probably the single best indicator of economic growth, while GDP per capita has a close correlation with the trend in living standards over time.