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Slide 2

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·Inflation means a sustained
increase in the general price
·If there is inflation the value of
money declines and there is an
increase in the cost of living.…read more

Slide 3

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Measuring Inflation
Consumer Price Index-CPI
·Household expenditure survey-seeks to
measure what people spend their money on. And
therefore get a typical basket of goods.
·This basket of goods gives a relative
importance to each different item.
·The basket of goods is updated each year to
take into account changes in expenditure
·Every month changes in prices of goods and
services are monitored and combined into a
single figure with using the weights in the
basket.…read more

Slide 4

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Problems with calculating CPI
·Family expenditure surveys don't include
everyone e.g pensioners.
·Changes in quality e.g computers have many
more features than 10 yrs ago which makes it
difficult to compare prices because they are
different goods.
·Ignores housing costs and is often lower than
the old RPI method.…read more


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