Suppose we calculate the percent change in real GDP from year 1 to year 2 using both the Laspeyres and the Paasche indices. With the Laspeyres index we get 12 percent and with the Paasche index we get 9 percent. The chain-weighted growth of real GDP is:
A) 1.5 percent
B) 9.75 percent
C) 1.33 percent
D) 9.5 percent
E) 10.5 percent

Question

Quizplus · Accepted Answer

The chain-weighted growth rate is the geometric mean of the Laspeyres and Paasche indices, which is approximately 10.5 percent.

Suppose We Calculate the Percent Change in Real GDP from Year