Welfare Payments Are Indexed for Inflation Using the CPI

question 51

Multiple Choice

Welfare payments are indexed for inflation using the CPI. A recent newspaper editorial claimed that welfare recipients are harmed by inflation as it is measured by the CPI. Is the newspaper editorial correct?

• A) The newspaper editorial is correct if the price of the basket consumed by welfare recipients increases faster than the price of the CPI basket.
• B) The newspaper editorial is correct if the price of the basket consumed by welfare recipients increases slower than the price of the CPI basket.
• C) The newspaper editorial is correct if the prices of the goods consumed by welfare recipients are cheaper than the goods in the CPI basket.
• D) The newspaper editorial is correct if the prices of the goods consumed by welfare recipients are more expensive than the goods in the CPI basket.

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Definitions:

Single-Parent Families

Family units consisting of one parent and his or her children, which may result from divorce, separation, death of a spouse, or unmarried parenthood.

Poverty Level

A defined threshold that determines the minimum income requirement for individuals and families to afford basic living expenses, used to identify and measure individuals' and households’ economic status.

Demarcation Lines

Boundaries that distinguish or separate different areas, responsibilities, or categories in various contexts.

Boundaries

In psychological and social contexts, boundaries define the limits and rules for acceptable behavior, communication, and interactions among individuals or groups.