IN ITS usual sense, the term inflation (for example price inflation) implies the increase in some index relative to its own value at some other time. In what follows the term relative inflation implies the increase (with time) of one index relative to another index. And the term will be restricted to mean an increase in the cost of finished goods relative to the cost of materials and wages. This relative cost will be measured by the product of the ratios (V'/M) (V'/W) = V'2/MW (' = value added, M = materials, W = wages). Increase in this relative cost may then be measured either by increase in V'2/MW or by decrease in MW/V'2 = B, say.2 When B decreases we shall have relative inflation of V' with respect to M and W, the only relative inflation herein considered.