Chained dollars is a method of adjusting real dollar amounts for inflation over time, to allow the comparison of figures from different years.[1] The U.S. Department of Commerce introduced the chained-dollar measure in 1996. It generally reflects dollar figures computed with 2012 as the base year.[2]
Chained dollars, also known as "chained consumer price index" or "chained CPI," is a measure of inflation that takes into account changes in consumer behavior in response to changes in prices. It is used to adjust certain economic variables, such as tax brackets and Social Security payments, for inflation. The traditional measure of inflation, known as the "headline CPI," assumes that consumers continue to buy the same basket of goods and services over time, even as prices change. However, in reality, consumers may adjust their spending habits in response to changes in prices. For example, if the price of beef increases, consumers may switch to purchasing chicken instead. The chained CPI accounts for these changes in consumer behavior by calculating the cost of a "chained" basket of goods and services that reflects how consumers adjust their spending in response to price changes. As a result, the chained CPI tends to grow more slowly than the headline CPI, as it takes into account the fact that consumers are shifting their spending to lower-priced items in response to price changes. The use of the chained CPI to adjust economic variables has been controversial, as it can result in slower growth in these variables over time, which may have negative impacts on certain groups of people, such as low-income individuals or seniors.
Constant Dollars: weighted by a constant/unchanging basket/list of goods and services.
Chained Dollars: weighted by a basket/list that changes yearly to more accurately reflect actual spending. The basket is an average of the basket for successive pairs of years; example of paired years are 2010–2011, 2011–2012, etc.
The technique is so named because the second number in a pair of successive years becomes the first in the next pair. The result is a continuous "chain" of weights and averages.[3] The advantage of using the chained-dollar measure is that it is more closely related to any given period covered and is subject to less distortion over time.[4][full citation needed]
Selected Per Capita Product and Income Series in Current and Chained Dollars (U.S. Bureau of Economic Analysis)
February 27, 2024
chained, dollars, method, adjusting, real, dollar, amounts, inflation, over, time, allow, comparison, figures, from, different, years, department, commerce, introduced, chained, dollar, measure, 1996, generally, reflects, dollar, figures, computed, with, 2012,. Chained dollars is a method of adjusting real dollar amounts for inflation over time to allow the comparison of figures from different years 1 The U S Department of Commerce introduced the chained dollar measure in 1996 It generally reflects dollar figures computed with 2012 as the base year 2 Contents 1 Description 2 Terms 3 See also 4 References 5 External linksDescription editChained dollars also known as chained consumer price index or chained CPI is a measure of inflation that takes into account changes in consumer behavior in response to changes in prices It is used to adjust certain economic variables such as tax brackets and Social Security payments for inflation The traditional measure of inflation known as the headline CPI assumes that consumers continue to buy the same basket of goods and services over time even as prices change However in reality consumers may adjust their spending habits in response to changes in prices For example if the price of beef increases consumers may switch to purchasing chicken instead The chained CPI accounts for these changes in consumer behavior by calculating the cost of a chained basket of goods and services that reflects how consumers adjust their spending in response to price changes As a result the chained CPI tends to grow more slowly than the headline CPI as it takes into account the fact that consumers are shifting their spending to lower priced items in response to price changes The use of the chained CPI to adjust economic variables has been controversial as it can result in slower growth in these variables over time which may have negative impacts on certain groups of people such as low income individuals or seniors Terms editThis section may be too technical for most readers to understand Please help improve it to make it understandable to non experts without removing the technical details May 2019 Learn how and when to remove this template message Constant Dollars weighted by a constant unchanging basket list of goods and services Chained Dollars weighted by a basket list that changes yearly to more accurately reflect actual spending The basket is an average of the basket for successive pairs of years example of paired years are 2010 2011 2011 2012 etc The technique is so named because the second number in a pair of successive years becomes the first in the next pair The result is a continuous chain of weights and averages 3 The advantage of using the chained dollar measure is that it is more closely related to any given period covered and is subject to less distortion over time 4 full citation needed See also editInflation adjustment Constant dollarsReferences edit Mark McCracken Definition of Chained dollars TeachMeFinance com Accessed 2009 05 11 Note the BEA using 2012 chained dollars https www bea gov news 2021 personal income and outlays november 2021 U S Department of Energy Chained Dollars Archived August 30 2007 at the Wayback Machine citing EIA Annual Energy Review 1999 Mark McCracken op cit nbsp This economics related article is a stub You can help Wikipedia by expanding it vteExternal links editSelected Per Capita Product and Income Series in Current and Chained Dollars U S Bureau of Economic Analysis Retrieved from https en wikipedia org w index php title Chained dollars amp oldid 1199584750, wikipedia, wiki, book, books, library,
