Indexation (Noun)
Meaning
A system of economic regulation: wages and interest are tied to the cost-of-living index in order to reduce the effects of inflation.
Classification
Nouns denoting acts or actions.
Examples
- The government implemented a system of indexation to ensure that the purchasing power of wages and pensions was not eroded by inflation.
- Indexation of interest rates to the cost-of-living index helped to maintain the real value of savings over time.
- The central bank's policy of indexation meant that the interest rate on loans was adjusted regularly to reflect changes in the inflation rate.
- The new law introduced a system of indexation for wages, which would automatically increase pay by the rate of inflation each year.
- By linking tax thresholds to the cost-of-living index through indexation, the government aimed to prevent fiscal drag and reduce the burden of taxation on low-income households.