Exercises on Section 5
The following exercises provide extra practice on the topics covered in Section 5.
Exercise 10 Calculating the RPI for February 2012
Find the value of the RPI in February 2012, using the data in the table below. The value of the RPI in January 2012 was 238.0.
| Group | Price ratio for February 2012 relative to January 2012: | 2012 weights: | Price ratio weight: |
|---|---|---|---|
Food and catering |
1.009 |
161 |
|
Alcohol and tobacco |
1.005 |
85 |
|
Housing and household expenditure |
1.003 |
412 |
|
Personal expenditure |
1.040 |
84 |
|
Travel and leisure |
1.005 |
258 |
|
Total |
Discussion
(The published index was 239.9. Again, the difference between this and your calculated value is because the ONS statisticians used more accuracy in their intermediate calculations.)
Exercise 11 Annual inflation rates and the purchasing power of the pound
For each of the following months, use Table 15 (in Subsection 5.3) to calculate the annual inflation rate given by the RPI and to calculate the purchasing power of the pound (in pence) compared to one year previously.
(a) October 2010
Discussion
For October 2010, the ratio of the value of the RPI to its value one year earlier is
so the annual inflation rate is 4.5%.
The purchasing power of the pound compared to one year previously is
(b) January 2011
Discussion
For January 2011, the ratio of the value of the RPI to its value one year earlier is
so the annual inflation rate is 5.1%.
The purchasing power of the pound compared to one year previously is
Exercise 12 Index-linking another pension
An index-linked pension (linked to the RPI) was £800 per month in April 2010. How much should it be in April 2011? (Again, use the RPI values in Table 15.)
Discussion
The RPI for April 2011 was 234.4 and the RPI for April 2010 was 222.8. So in April 2011, the pension should be