Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which index is primarily focused on the price changes of household goods and services in the UK?

1. CPI

2. RPI

3. HICP

4. RPIX

The correct answer is: RPI

The Retail Price Index (RPI) is primarily focused on measuring the price changes of a broad array of household goods and services in the UK. It takes into account various components like food, clothing, housing costs, and transportation, effectively reflecting the cost of living faced by households. The RPI is significant because it is one of the oldest measures of inflation in the UK and has historically been used for purposes such as adjusting rents and pensions. CPI, or the Consumer Prices Index, is also used to measure inflation but has a different methodological approach and scope, particularly in regard to housing costs. HICP, the Harmonised Index of Consumer Prices, is aimed at comparing inflation rates across European Union member states and does not focus specifically on UK household goods and services. RPIX was a variation of RPI which excluded mortgage interest payments, but it is not as comprehensive in terms of household goods as RPI. Therefore, RPI stands as the most relevant index for understanding price changes specifically for household goods and services in the UK context.