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Teaching Chain-Weight Real GDP Measures

  • Miles Cahill

    ()

    (Department of Economics, College of the Holy Cross)

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    In 1996, the Bureau of Economic Analysis (BEA) changed the method used to calculate measures of real GDP from a Laspeyres or Paasche index to a Fisher ideal index, also called a chain-weight index. Even though this is a significant change in approach and has resulted in extensive revisions of reported statistics, many intermediate-level textbooks treat this topic casually, if at all. This article presents two applications in which this topic can be explored more thoroughly, with the help of spreadsheet software. One exercise introduces the concept of the chain-weight index by comparing it to Laspeyres, Paasche and ideal indexes with the use of utility analysis. The second exercise is a step-by-step process to calculate chain-weight index statistics.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00220480309595217
    File Function: Final published version
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    Paper provided by College of the Holy Cross, Department of Economics in its series Working Papers with number 0206.

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    Length: 11 pages
    Date of creation: Dec 2002
    Date of revision:
    Publication status: Published in Journal of Economic Education, Vol. 34:3, Summer 2003, pp. 224-234.
    Handle: RePEc:hcx:wpaper:0206
    Contact details of provider: Phone: (508)793-3362
    Fax: (508) 793-3708
    Web page: http://www.holycross.edu/departments/economics/website/

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    1. R. D. Rossiter, 2000. "Fisher Ideal Indexes in the National Income and Product Accounts," The Journal of Economic Education, Taylor & Francis Journals, vol. 31(4), pages 363-373, December.
    2. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
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