Question

Name several forms of indexing in the private and public sector.

a) Wage indexing
b) Price indexing
c) Cost-of-living indexing
d) All of the above

Answer 1

Indexing in the private and public sectors includes wage contracts with COLAs in the private sector and adjustments of tax brackets and Social Security payments in the public sector to keep up with inflation.

Step-by-step explanation:

Several forms of indexing in the private and public sectors are designed to adjust payments automatically to keep up with inflation. In the private sector, this includes wage contracts with cost-of-living adjustments (COLAs), which are put in place to ensure that wages rise in line with the cost of living. An example of this would be a wage contract that stipulates COLA plus a certain percentage. On the other hand, the public sector involves indexing mechanisms such as adjustments of tax brackets and Social Security payments to mitigate the impacts of inflation on taxpayers and retirees.