Abstract The article examines, the price index aspects of the making of general price level adjustments. It is the authors' position that much of the research on price-level measurement for general adjustment purposes has been based on the wrong formulation. The basis for this position is developed in the article, some difficulties arising in the present situation are examined, and an alternative formulation is suggested by the author. There are two basic principles of index number usage in making general adjustments. One, when a time series in historical-dollar units is adjusted by a price index, the adjusted series should be as measuring relative quantity changes, and second, the population of items for which quantity changes are measured is defined by the item coverage and weighting structure of the price index employed in the adjustments, and not by the items. It is sometimes stated that the general indexes all move in a common pattern and accordingly it does not matter which index is used.
Hannum et al. (Mon,) studied this question.