Which costs are included in the Retail Price Index (RPI)?

The Retail Price Index (RPI) is a measure of inflation that reflects the average change over time in the prices of a representative basket of goods and services, primarily consumed by households. One of the key components of this index is housing costs, which include elements such as rent, mortgage interest payments, and council tax. These costs are significant as they represent a substantial portion of household expenditures, directly impacting the overall cost of living.

Including housing costs and council tax in the RPI allows for a more accurate representation of the economic pressures faced by households, as these expenses are relatively fixed and largely unavoidable for most residents. This inclusion is crucial for understanding how broader economic trends affect consumer purchasing power.

In contrast, the other choices focus on costs or returns that do not directly reflect consumer spending behavior in the same manner. Business taxes and fees pertain more to business operational costs rather than household expenditures. Investment returns and dividends, as well as interest rates and bond yields, relate to financial markets and investment income, which do not form part of the everyday financial commitments that the RPI is designed to track. Thus, housing costs and council tax are the correct components included in the Retail Price Index, emphasizing the measure's focus on household financial reality.