One of the important economic index is consumer price index (CPI) that it is for measuring inflation , due to it is well-known to inflation index in economy. Consumer price index is on of the price indexes that show changes in goods services prices use bye households. There are many researches and papers about inflation in economic literatures. There is many studies about the causes of inflation in Iran too that in these use econometrics. Role of governments in economy propounded after recommendations of Keynes. There for economic policy for acquisition the system economic goals were brighten. Governments for achieve to full employment, high economic growth, limited scope of oscillation of prices, control external payment balance, improvement distribution of income , … decided to designing policies and tools for exercising them. In this research the effect of government policies on consumer price index ( CPI ) are analyzed applying a system dynamic model. The economic model includes production sector, factors production sector, foreign trade sector, price and money sector, and government sector. The results show that the effect of government current expenditures has significant influence on increasing CPI whereas the Central Bank indecency when covers the government budget may decline the level of CPI over time. According to our results, the policymakers should strengthen the private sector and improve the independency of Central Bank. Key words: System Dynamics, Consumer Price Index, Economic Policies
