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asked ago in General Economics Questions by (120 points)
The question of how to measure inflation seems easy to answer through a reference to the common price indexes, which are in use for this purpose. From my personal point of view, it is very difficult to measure “real” inflation through this price indexes. For example, an increase or decrease of the VAT rate has an effect of the price index (Although this increase of the price index was not caused by an increase of the money stock). Another example is that there is from my personal point of view no clear correlation between prices and inflation, because a decrease of the saving rate would lead to a higher consumption rate. When because of this additional consumption the demand after goods would be higher as the supply an increase of consumer prices would take place. Because of this reason I want to ask, whether alternatives to this price index methods exist. Furthermore, I want to ask, whether there are any opportunities to measure the “real” rate of inflation more accurately by using a price index.

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