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[edit]

References[edit]

  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.

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