Index Numbers of Price and Quantity

All flows in the national accounts are expressed in value terms. In making comparisons over time this proves to be rather a drawback, because the units in which the flows are measured in, say, the two years compared may nominally be the same, e.g. pounds, sterling, but they will normally differ in what they can buy in terms of goods and services. That change in the purchasing power of money over commodities finds its expression in a change in the prices of those commodities. Thus, for instance, if the price of a particular commodity, such as granulated sugar or milk of a given quality, has doubled from one year to another year, then the purchasing power of a unit of currency over that commodity will have been halved from the one year to the other.