In countries where inflation is high and volatile, partial protection from the cost of inflation can be provided by
A)the indexation of debt
B)wage indexation
C)cost-of-living adjustments
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

All of the above options can provide partial protection from the cost of inflation in countries where inflation is high and volatile. Indexation of debt ensures that the nominal value of debt adjusts with inflation, which reduces the burden of inflation on borrowers. Wage indexation ensures that the real value of wages remains constant, which protects workers from the negative effects of inflation. Finally, cost-of-living adjustments ensure that the value of certain benefits such as pensions and welfare payments keep pace with inflation, which protects recipients from inflation's effects.

In Countries Where Inflation Is High and Volatile, Partial Protection