Chain volume measures are complicated; therefore, real cases are used for illustration. Chain volume measures (reference year = 2010)of government final consumption expenditure are used.

Government final consumption expenditure (government expenditure) equals the sum of remuneration paid by government (remuneration) and net purchase of goods and services (net purchase). Detailed steps as follows:

The first step is to deflate the current price of each component. First, divide the current prices of remuneration and net purchase by price indices compiled using the preceding year as the base year, to derive short term volume measures. Table 4 shows that the short term volume measure of remuneration in 2011 is \$10,740 million, equal to current price (\$11,898 million) divided by price index (110.78); short term volume measure of net purchase is derived in the same way, where short term volume measure of government expenditure (\$19,385 million) equals the sum of the short term volume measure of remuneration (\$10,740 million) and net purchase (\$8,645 million).

The second step is to divide the short term volume measure of each component by the current price in the preceding year, to derive the short term volume index of each component. Short term volume indices of government expenditure in 2011 and 2010 are 105.46 (19,385/18,382) and 104.87 (17,502/16,689) respectively.

The third step is to calculate the chain volume indices (reference year = 2010) using the abovementioned chain volume measures formulae. For years following the reference year, multiply the index (100) in the reference year (2010) by short term volume index, then multiply by the chain volume index of the preceding year. In 2011, chain volume index of government expenditure is 105.46 (i.e., short term volume index in 2011 is 105.46). For years preceding the reference year, divide the index (100) in the reference year (2010) by the short term volume index in the following year, then multiply by the chain volume index of the following year. In 2009, chain volume index is 95.35, i.e., 100 divided by short term volume index in 2010 (104.87), and multiplied by chain volume index in 2010 (100.00); chain volume index in 2008 is 84.23, i.e., 100 divided by short term volume index in 2009 (113.21), and multiplied by chain volume index in 2009 (95.35).

The fourth step is to multiply the chain volume indices by current prices in the reference year to derive the chain volume measures. In 2011, chain volume measure of government expenditure (\$19,385 million) equals chain volume index in 2011 (105.46) multiplied by the current price in 2010 (\$18,382 million); chain volume measure in 2009 (\$17,528 million) equals chain volume index in 2009 (95.35) multiplied by current price in 2010; chain volume measure in 2008 (\$15,483 million) equals chain volume index in 2008 (84.23) multiplied by current price in 2010.

As government expenditure, remuneration and net purchase are calculated individually, except the reference year and the following year, chain volume measures are non-additive.

Table 4. Chain volume measures of government expenditure

 Year 2008 2009 2010 2011 Current price (MOP 106) Government expenditureRemunerationNet purchase 14,8209,1005,720 16,6899,7226,967 18,38210,3847,998 20,88311,8988,985 Price index ( t - 1 = 100 )Government expenditureRemunerationNet purchase 100.3598.27 102.06109.15 110.78103.93 Short term volume measures ( t - 1 = 100 )Government expenditureRemunerationNet purchase 16,7779,6887,089 17,50210,1757,327 19,38510,7408,645 Short term volume index ( t - 1 = 100 )Government expenditureRemunerationNet purchase 113.21106.47123.94 104.87104.65105.18 105.46103.43108.09 Chain volume index ( 2010 = 100 )Government expenditureRemunerationNet purchase 84.2389.7576.71 95.3595.5695.08 100.00100.00100.00 105.46103.43108.09 Chain volume measures ( 2010 = 100 )Government expenditureRemunerationNet purchase 15,4839,3206,135 17,5289,9237,604 18,38210,3847,998 19,38510,7408,645