case. The larger adjustment would make no difference because the brassage limitation would prevent it from taking effect.
(b) Assumptions same as in standard case except: adjustment changed from 1% to 2% and also: brassage changed from 1% to 2% or above.
A deviation above par of 1 % would then call forth a 2% increase in the weight of the dollar. The influence of this 2% adjustment would be to decrease the index number by 2%, which influence, however, would be partly neutralized by the assumed upward tendency of 1%. The net result would be a fall of 1% which would bring the index number back to 100 at the next adjustment date. This would call for no adjustment in the next period, and the index number, being acted upon only by the upward tendency, would become 101. Thus it would continue to alternate between 100 and 101.
(c) Assumptions same as in standard case except: adjustment changed from 1% to ½%.
We find the following results:
| Index Number[1] | Influence | Tendency | |
| Beginning of 1st interval | 100 | ||
| During 1st interval | 0 | +1 | |
| Beginning of 2d interval | 101 | ||
| During 2d interval | -½ | +1 | |
| Beginning of 3d interval | 101½ | ||
| During 3d interval | -¾ | +1 | |
| Beginning of 4th interval | 101¾ | ||
| During 4th interval | -⅞ | +1 | |
| Beginning of 5th interval | 101⅞ | ||
| During 5th interval | -15⁄16 | +1 | |
| Etc. |
The index number increases but never reaches 102.
(d) Conclusion as to adjustment.
We conclude that the nearer the adjustment is to
- ↑ This column also shows (by subtracting 100) the deviation from par and (by subtracting 100 and dividing by 2) the adjustment of the dollar's weight. The latter is also always equal, numerically, to its influence, given in the second column.
