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Index numbers and the measurement of real GDP

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  • Brian Motley

Abstract

The measures of real GDP and inflation are aggregates of many individual prices and quantities. These variables are measured using fixed-weight indexes, which can give a misleading impression of price and output changes in a particular year if the structures of output and relative prices are different from those in the base year. This measurement problem adds to the uncertainties facing policymakers. ; These ambiguities result from the definitions of output and inflation in use. This article describes alternative measures of growth and inflation that have a stronger theoretical basis and avoid these ambiguities. Operational versions of these measures will be introduced by the Bureau of Economic Analysis in 1992. These new measures will remove one source of uncertainty facing policymakers.

Suggested Citation

  • Brian Motley, 1992. "Index numbers and the measurement of real GDP," Economic Review, Federal Reserve Bank of San Francisco, pages 3-13.
    • Handle: RePEc:fip:fedfer:y:1992:p:3-13:n:1
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    File URL: http://www.frbsf.org/publications/economics/review/1992/92-1_3-13.pdf
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    Citations

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    Cited by:

    1. Wynne, Mark A & Sigalla, Fiona D, 1996. "A Survey of Measurement Biases in Price Indexes," Journal of Economic Surveys, Wiley Blackwell, vol. 10(1), pages 55-89, March.
    2. Robert Ingenito & Bharat Trehan, 1996. "Using monthly data to predict quarterly output," Economic Review, Federal Reserve Bank of San Francisco, pages 3-11.
    3. Charles Steindel, 1999. "The impact of reduced inflation estimates on real output and productivity growth," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 5(Jun).
    4. Charles Steindel, 1997. "Measuring economic activity and economic welfare: what are we missing?," Research Paper 9732, Federal Reserve Bank of New York.

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    Keywords

    Gross domestic product;

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