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# 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.

Table 16 Calculating the RPI for February 2012
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

(Source: Office for National Statistics)

### 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