32. The method of classes of equivalence is used when the characteristics of a product are not quantifiable. The products are classed in terms of special aualities. This method involves the use of a rather lengthy and detailed auestionnaire. The analyst himself evaluates the differences in characteristics a6 a base for comparing the products, The better known the qualities of the products the less subjective is this method. Much use has been made of this method in this study. 33. The calculation of price indexes involves choices and hypotheses which are of more than just technical significance, as they could have an important impact on the assessment of a country's compliance with an agreement to reduce military expenditures. 34. The calculation of a price index makes it possible to assess the importance of real change in a country's expenditures and the results can also be used to calculate, by simplified methods, PPPs for the time periods not covered by specific international comparison studies. C. Construction of purchasing-power parities 35. Exchange rates are generally used to compare major national aggregates. Unfortunately, such comparisons would often lead to serious errors which would create great problems in the context of international negotiations on a reduction of military expenditures. The reasons for this are the following. In the first place, exchange rates have only a limited bearing on the domestic sector, they are sometimes arbitrary and they are governed by economic policies that affect their reliability as indicators of the relative purchasing power of currencies in their respective domestic markets. Exchange rates may be set either administratively by Governments or by the action of currency markets. There are erratic variations in market exchange rates owing to capital movements, differential rates of inflation / ..* ~,‘40/421 English Page 14 and changes in the growth of the technological, productive and selling capacities of countrie-s. 
**Analysis**
The text appears to be discussing economic concepts and methods, specifically related to international trade and finance. It mentions the calculation of price indexes, purchasing-power parities, and exchange rates, which are all important topics in the field of international economics. Additionally, the text mentions the use of these concepts in the context of international negotiations on military expenditures, suggesting that it is relevant to the broader field of international relations.

**Category**
International trade, Economics