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Teaching Chain-Weight Real GDP Measures

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  • Miles B. Cahill

Abstract

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.

Suggested Citation

  • Miles B. Cahill, 2003. "Teaching Chain-Weight Real GDP Measures," The Journal of Economic Education, Taylor & Francis Journals, vol. 34(3), pages 224-234, January.
    • Handle: RePEc:taf:jeduce:v:34:y:2003:i:3:p:224-234
    DOI: 10.1080/00220480309595217
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    References listed on IDEAS

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    1. Miles Cahill & George Kosicki, 2001. "A Framework for Developing Spreadsheet Applications in Economics," Working Papers 0102, College of the Holy Cross, Department of Economics.
    2. Miles Cahill & George Kosicki, 2000. "Exploring Economic Models Using Excel," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 770-792, January.
    3. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    4. Michael J. Boskin, 1998. "Consumer Prices, the Consumer Price Index, and the Cost of Living," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 3-26, Winter.
    5. W. Erwin Diewert, 1998. "Index Number Issues in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 47-58, Winter.
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