The formula aside, I thought that inflation was actually calculated by charting the price deltas of a 'standard basket of goods' [1] [2]. In which case, assumi

The formula aside, I thought that inflation was actually calculated by charting the price deltas of a 'standard basket of goods' [1] [2]. In which case, assuming that Output can be measured with a reasonable degree of consistency (economic output of a nation) and assuming that money supply is controlled, then V can be calculated. More importantly V can be used as an instrument to control inflation. I guess the complications come from the side effects of manipulating V, and increasingly (especially for non-US countries) the impact of foreign economic factors. Also the measurement of inflation has a built in delay (eg: you measure the aggregate inflation of the previous quarter) which can be problematic if inflation is changing. I am not an economist, but this is how I understand things. [1] Depending on who is calculating inflation, sometimes these prices are seasonally adjusted. [2] I somewhat oversimplify things. See http://www.rba.gov.au/publications/confs/2009/ravazzolo-vahey-disc.pdf http://www.rba.gov.au/publications/confs/2009/ravazzolo-vahe...