# Indexation and inflation

Source: https://projectalevel.co.uk/economics/macro_economics/indexation_and_inflation

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- Does indexation offer a solution to inflation and its related problems?
- In a way, it does. It reduces many costs of inflation although some costs remain, for example, menu cost and shoe leather costs. It also reduces pressure on government to tackle the problem of inflation directly.
- Indexation may hinder government attempts to reduce inflation because indexation builds in cost structures, such as wage increases, which reflects past changes in prices.
- Although indexation can ease the pain of inflation, it is not a cure for it.