Inflation: a sustained rise in price level
How inflation is measured:
- select a base year (relatively standard year in which nothing unusual happened)
- decide what items should be included in the price index - shopping basket
- weights are attached to the goods, reflecting the proportion spent on different items
Consumer prices index: a measure of changes in the price of a representative basket of consumer goods and services.
Retail price index: a measure of inflation that is used for adjusting pensions and other benefits to take into account changes in…