Can the Chain-Weight Measure Up?
The primary advantage of the chain-weight measure is that it allows for substitution effects overtime—that is, it accounts for changes in consumption and production patterns that occur from relative price changes. Another important advantage is that chain-type measures value output of final goods and services for any period in terms of what the structure of the economy was at the time. Under the old method, Commerce would effectively rewrite economic history every time it reconfigured the GDP accounts to a different base year. Although the chain-weight measure of GDP depicts a more accurate portrayal of the business cycle, there are some drawbacks associated with using it. First, because of the way the chain-type measures are constructed, the components of GDP do not sum exactly to the total. In contrast, under the old method, GDP was the exact sum of its components. In percentage terms, however, this discrepancy is pretty small. An ancillary problem that must be overcome concerns maki
