TeachMeFinance.com - explain Chained dollars
A measure used to express real prices. Real prices are those that have been adjusted to remove the effect of changes in the purchasing power of the dollar; they usually reflect buying power relative to a reference year. Prior to 1996, real prices were expressed in constant dollars, a measure based on the weights of goods and services in a single year, usually a recent year. In 1996, the U.S. Department of Commerce introduced the chained-dollar measure. The new measure is based on the average weights of goods and services in successive pairs of years. It is "chained" because the second year in each pair, with its weights, becomes the first year of the next pair. 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.
About the author
Copyright © 2005 by Mark McCracken, All Rights Reserved. TeachMeFinance.com is an informational website, and should not be used as a substitute for professional medical, legal or financial advice. Information presented at TeachMeFinance.com is provided on an "AS-IS" basis. Please read the disclaimer for details.