What do you mean by Deflating of Index Numbers?

4 years ago
Business Statistics

Deflating means making allowances for the effect of changing price levels. A rise in price level means a reduction in the purchasing power of money.

The process of adjusting a series of salary or wages or income according to current price changes to find out the level of real salary, wages or income is called deflating of index numbers. It is necessary when price level is increasing and cost of living is also increasing.

Index No. of real wage  = Real wage of current year / X      100

                                               /  Real wage of base year

Where            Real wage =     Money wage or income /                        X  100

                                         /Price Index or Cost of living index

 

 

 

 

 

 

 

 

 

 

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Surya Bikram Bhandari
Surya Bikram Bhandari
Nov 14, 2021
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