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.

The difference between chained dollars and the previous measure, constant dollars, is that while the latter is weighted by a constant basket of goods and services, chained dollars are weighted by a basket that changes from year to year so as to more accurately reflect spending. The basket is an average of the basket for successive pairs of years.

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 "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 therefore subject to less distortion over time.[3]

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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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