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What is Inflation? How can it be controlled?
Member rating: No Rating | Words: | Submitted: Wed Oct 22 2003
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What is Inflation? How can it be controlled? Inflation can be defined as any sustained increase in the general price level. There are four methods used to measure it: the Retail Price Index, the underlying rate of inflation, input cost inflation and the Producer Price Index. The Retail Price Index (RPI) is the most common method, which measures the change in prices over the previous year. It is a weighted index whereby necessity goods and services get a higher precedence in the overall count. The proportion of income spent by the average household on particular categories of goods such as food and housing determines the weighting. It measures a basket of 600 goods and services that are periodically changed to reflect changing consumer spending patterns in the economy. The RPI only measures the price of traded goods. The underlying rate of inflation is calculated in the same way as the RPI...
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