Appendix: Measuring Real GDP

This appendix explains the method used by the Bureau of Economic Analysis (BEA) to calculate real GDP using a measure called chained-dollar real GDP. We begin by explaining the problem that arises from using the prices of the base year (the method on previous page) and how the problem can be overcome.

The Problem With Base Year Prices

When we calculated real GDP on previous page, we found that real GDP in 2016 was 60 percent greater than it was in 2009. But instead of using the prices of 2009 as the constant prices, we could have used the prices of 2016. In this case, we would have valued the quantities produced ...

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