A measure used to express real prices. Real prices are those that have been adjusted to remove the effect of changes in the purchasing power of the dollar; they usually reflect buying power relative to a reference year. Prior to 1996, real prices were expressed in constant dollars, a measure based on the weights of goods and services in a single year, usually a recent year. In 1996, the U.S. Department of Commerce introduced the chained-dollar measure. The new measure is based on the average weights of goods and services in successive pairs of years. It is "chained" because the second year in each pair, with its weights, becomes the first year of the next pair. The advantage of using the chained-dollar measure is that it is more closely related to any given period covered and is therefore subject to less distortion over time.
Robert Martinez is a Certified Financial Planner and Chartered Retirement Planning Counselor with 25 years of experience helping clients prepare for retirement. He specializes in Social Security optimization, Medicare planning, and retirement income strategies. Robert is a frequent speaker at retirement planning seminars and has been featured in major financial publications including Forbes and AARP.