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Indexation
Definition of 'Indexation'
A system where wages, prices and interest paid on securities is not fixed, but are adjusted in proportion to a relevant index, eg. the retail price index.
The advantage of indexation is that they protect the holder against large unforeseen changes in the value of money. The presence of a large number of index-linked arrangements in an economy makes inflation more difficult to stop, as it removes the effects of price increases.
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