If Inflation Is Estimated by an Index Like the Consumer

question 129

Multiple Choice

If inflation is estimated by an index like the consumer price index (CPI) to be higher than it actually is,who is liable to be hurt by the error?

• A) corporations that adjust worker salaries to keep pace with inflation
• B) workers whose negotiated union wages include an inflation adjustment
• C) people whose Social Security incomes are adjusted for inflation
• D) consumers who pay a fixed percentage of purchases as sales tax
• E) entrepreneurs who borrow from banks at a fixed rate of interest

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Definitions:

Life Expectancy

The average period that a person may expect to live, based on statistical averages for a particular population.

Social Security Retirement System

A government program that provides retirement income to eligible retirees, funded by payroll taxes from current workers and employers.

Income Redistribution

A policy aimed at balancing economic inequality by reallocating wealth and income from wealthier segments of society to poorer ones through taxes, welfare systems, or other means.

Social Security Benefit Formula

The calculation used to determine the amount of benefits one receives from the Social Security Administration, based on earnings history and age.