Question

The process by which contributory program benefits paid out would be modified annually by a cost-of-living adjustment is known as:__________

Answer 1

Answer:

This process is known as indexing.

Explanation:

Indexing is a process of adjusting benefits or payments to the rate of inflation. It takes place periodically. For example, employees' wages are adjusted according to the inflation level in order to keep up with the cost-of-living.

While inflation can have an array of negative effects, like hoarding (excessive purchase of consumer goods in advance before their prices go up), indexing can mitigate them. With the example of hoarding, if people know that their wages will keep up with the prices of goods (indexing), they will refrain from hoarding.