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Inflation 1) Inflation is usually defined as a sustained increase in the general price level. 2) The main measure of inflation is the annual percentage increase in prices. The most often quoted figure is the annual change. The prices usually measured are retail prices. The index that measures inflation is called the Retail Price Index (RPI). Inflation is changes in the RPI. The RPI is measured by taking a large number of prices, working out how much each price has changed and then weighting the price changes according to their importance. This is because some price changes have a much bigger impact on people than others. For example, a 5% increase in food prices is likely to affect people much more than a 100% increase in the price of matches. Food therefore gets a much bigger weighting than matches, and changes in the price of food will have a bigger effect on...

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