Thursday, April 23, 2009

the consumer price index (c.p.I)

while the c.p.i stands up reasonably well in relation to the third requirement, it appears to fall well short of the ideal when considered in relation to the first two and the last. Many imported goods are included in the C.P.I regimen. Also,since the index is intended to measure only variations in the retail prices of those goods and services which attract a substantial proportion of the aggregate expenditure of wage-earner, it is far from comprehensive. finally, the index covers all important raw foods and all commodities whose whose prices are subject to significant variation through fiscal action, as is only to be expected given the purpose for which it is designed. as a result the index is by no means unaffected by the type of temporary price increase that we exclude in our definition of inflation.

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