Social Security Payments Are Indexed for Inflation Using the CPI

question 41

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 could be correct if the prices of the goods consumed by Social Security recipients change at a different rate than the prices of the goods in the market basket used to compute the CPI
• D)The newspaper editorial is incorrect under all circumstances.

---

Definitions:

Incremental Sales

The additional revenue generated from a specific marketing or sales effort, beyond the expected or baseline sales level.

Income Tax Rate

The segment of income that governments require individuals and corporations to pay as tax.

Straight-Line Depreciation

A technique for distributing the expense of a physical asset uniformly across its lifespan.

Capital Budgeting

A decision-making process used to evaluate potential expenditures or investments that are significant in amount. It involves the assessment of the future cash inflows and outflows to determine whether the return meets a set benchmark.