If You Index Social Security Benefits for Prices Rather Than

question 35

Multiple Choice

If you index Social Security benefits for prices rather than wages, this is likely to

• A)reduce benefits.
• B)increase benefits.
• C)prevent Social Security bankruptcy altogether.
• D)bring about Social Security bankruptcy earlier.

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Definitions:

Inflation

A measure of the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Money Supply

A comprehensive sum of money in an economy at any given point, covering cash, coins, and the funds maintained in demand and savings deposits.

Price Level

A measure of the average prices of goods and services in an economy at a given time, often considered in terms of inflation or deflation.

Real Interest Rate

The rate of interest an investor expects to receive after allowing for inflation. It more accurately reflects the real cost of borrowing and the real yield to lenders.