Indexation is a method whose use can be associated with which one of the following ?
[amp_mcq option1=”Controlling inflation” option2=”Nominal GDP estimation” option3=”Measurement of savings rate” option4=”Fixing of wage compensation” correct=”option4″]
This question was previously asked in
UPSC CDS-2 – 2019
Indexation is a technique used to adjust payments or values to offset the effects of inflation. It is commonly applied to wages and salaries (often through Cost of Living Adjustments – COLA), pensions, social security benefits, and bond yields, among others, to maintain their real purchasing power. Thus, it is directly associated with the fixing or adjustment of wage compensation (and other forms of payment).
Indexation links a monetary payment or value to a price index, such as the Consumer Price Index (CPI), so that it rises automatically as the index rises.