Social Security Payments Are Indexed for Inflation Using the CPI

question 206

Multiple Choice

Social Security payments are indexed for inflation using the CPI.A recent newspaper editorial claimed that Social Security recipients are harmed by years of low inflation because they do not receive as large an increase in their payments as they do in years of high inflation.Which of the following statements is correct?

• A)The newspaper editorial is correct under all circumstances.
• B)The newspaper editorial is correct if the market basket consumed by Social Security recipients is the same as the market basket used to compute the CPI.
• C)The newspaper editorial is correct if the prices of the goods consumed by Social Security recipients increase faster than the prices of the goods in the market basket used to compute the CPI.
• D)The newspaper editorial is correct if the prices of the goods consumed by Social Security recipients increase more slowly than the prices of the goods in the market basket used to compute the CPI.

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Definitions:

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