Question

Indexing is the process of: Multiple Choice

a. increasing a real quantity by an amount equal to the percentage change in a price index.
b. increasing a nominal quantity by an amount equal to the percentage change in a price index.
c. dividing a nominal quantity by a price index.
d. dividing a real quantity by a price index.

Answer 1

The correct answer is b. Increasing a nominal quantity by an amount equal to the percentage change in a price index.

Step-by-step explanation:

Indexing consists of adjusting prices according to the changes of a particular index. It looks to create a protective shield against sudden fluctiations of the indicator, when affecting one or multiple segments of an economy. Nominal quantities go up or down and are adjusted proportionally according to the index to keep the purchasing value of money stable through time.