Economic Statistics:

Measurement Problems Can Affect the Budget and Economic Policy-Making

GGD-95-99: Published: May 2, 1995. Publicly Released: May 2, 1995.

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Pursuant to a congressional request, GAO reviewed problems with economic statistics, focusing on how they can affect the federal budget as well as the formulation of economic policy.

GAO found that: (1) many economists believe that several technical problems limit the Consumer Price Index's (CPI) accuracy in measuring inflation; (2) these technical problems could cause CPI to overstate inflation, although complete information on measurement errors is inconclusive; (3) the extent and direction of inflation measurement is important, since slight misstatements could significantly affect government costs; and (4) statistical limitations can affect the policymaking process by increasing policymakers' uncertainty about current economic conditions and the potential effectiveness of economic policies.

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