2019 · Q43
Indexation is a method whose use can be associated with which one of the following ?
General KnowledgeIndian Economy
- AControlling inflation
- BNominal GDP estimation
- CMeasurement of savings rate
- DFixing of wage compensation
Explanation
Indexation means linking a payment to a price index (CPI/WPI) so its real value is preserved; its classic application is wage indexation through dearness-allowance or cost-of-living adjustment (COLA) clauses — i.e., fixing wage compensation in real terms. Indexation is not a method of controlling inflation; if anything, generalised wage indexation can feed a wage-price spiral. Hence the correct association is fixing of wage compensation.