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.

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Definitions:

Central Location

A central or typical value for a probability distribution, often represented by the mean, median, or mode.

Measure

A quantitative indication or estimation of a variable's extent, size, amount, or degree.

Histogram

A graphical representation of the distribution of numerical data, often showing bins or intervals and the count of observations within each.

Symmetric

A symmetric shape or distribution shows mirror-image symmetry along a central axis, meaning it looks the same on both sides of the center.