A program of complete indexation would

Question

Quizplus · Accepted Answer

A program of complete indexation would adjust wages, taxes, and other financial contracts automatically for inflation, thus reducing the costs associated with inflation, such as the distortion of price signals and the arbitrary redistribution of wealth. It would also make the economy more sensitive to supply shocks because prices would adjust more quickly, reflecting changes in supply and demand without the lag that non-indexed systems might experience. Furthermore, by automatically adjusting for inflation, the role of expectations about inflation in economic decision-making would be diminished, as individuals and businesses would not need to speculate about future inflation rates for contract negotiations or financial planning.

A Program of Complete Indexation Would