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To: Skeeter Bug who wrote (88603)	4/2/2001 12:19:15 PM
From: GraceZ	Read Replies (1) \| Respond to of 436258

The Chain Index of Real Gross Domestic Product william-king.www.drexel.edu Base Year william-king.www.drexel.edu But now we need to step back to the beginning. We need to find a way to measure GDP in dollars of constant purchasing power. We begin by choosing a "base year" and comparing purchasing power in any other year with purchasing power in the base year. For current U.S. economic statistics, the base year is 1992. The year we compare to the base year is called the "current" year. That doesn't mean this year: if we compare 1959 with 1992, 1959 is the "current" year. If we compare 1993 with 1992, 1993 is the "current" year. Next, we use the method just outlined to get the rates of increase of real production from one year to the next. This is the average rate for the two methods. Rates of increase in real production are used to express production for all years in terms of a the same year, working backward and forward from the "base year" to which all are compared. The statistical sources express this by saying that real GDP is measured in "chained constant dollars." For example, according to the Federal Reserve Bank of St. Louis' "FRED" data-base, the U. S. rate of real production for the third quarter of 1995 was $6776.5 in chained 1992 dollars. In this example, 1992 is the base year, and the production of various goods and services in the third quarter of 1995, if continued at the same rate for a full year, would have had a market value of $6776.5 in dollars of 1992 purchasing power -- as nearly as we can figure, using the "chain index" approach.