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Retail price index (RPI)

(See inflation)

The official measure of inflation is known as the Retail Price Index (RPI), which is based on prices of a range of products and services. Whether this is an accurate measure of inflation from out personal point of view depends on our own circumstances and of course those change over time.

When we talk of changes in price over several years, we could mean either the amount of the change in ‘money terms’ or in ‘real terms’. For example, between 1946 and 2000 house prices increased on average by 9% a year in money terms. A house that cost £1,459 in 1946 (that sounds hard to believe now, but it’s true!) would have cost £101,000 in 2000. However, inflation alone would have increased the price to £60,000 by 2000. The difference, £40,000, represents a real growth rate of about 2% a year.

 

 

 

12 April, 2008
 
© 2008 K.R.Wade and Co Ltd