Teaching chain-weight real GDP measures

• Published in: The Journal of economic education Vol. 34; no. 3; pp. 224 - 234
• Main Author: Cahill, Miles B.
• Format: Journal Article
• Language: English
• Published: Washington Taylor & Francis Group 2003; Heldref Publications; Helen Dwight Reid Foundation; Taylor & Francis Inc
• Series: Journal of Economic Education
• Subjects: Approximation; Base year; Berechnung; Bias; chain-weight GDP; Consumer Price Index; Content Articles in Economics; Cost Indexes; Curricula; Economic analysis; Economic growth rate; Economic indicators; Economic indices; Economic Research; Economic statistics; Economics education; Educational Technology; Fachdidaktik; GDP; Gross Domestic Product; Gross domestic product indices; Growth rate; Index; Macroeconomics; Messung; National income and product accounts; NIPA; Price indices; Real gross domestic product; Sozialprodukt; Spreadsheets; Studies; Teaching; teaching economics; Teaching Methods; Textbooks; USA; Wirtschaftskunde; United States > US
• ISSN: 0022-0485; 2152-4068
• DOI: 10.1080/00220480309595217

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 authors of intermediate-level textbooks treat this topic casually, if at all. In this article, the author 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.