Question
Asked By StarryKnight48 at
Answered By Expert
Barry
Expert · 5.9k answers · 5k people helped
Solution By Steps
Step 1: Understanding CPI
The Consumer Price Index (CPI) measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It’s used to index Social Security payments for inflation.
Step 2: Analyzing the Claim
The editorial claims that low inflation harms Social Security recipients because their payments don’t increase as much. This assumes that the CPI accurately reflects the inflation experienced by Social Security recipients.
Step 3: Considering Different Inflation Rates
If the inflation rate for goods consumed by Social Security recipients is different from the overall CPI inflation rate, then the adjustments to Social Security payments may not accurately reflect their cost of living changes.
Step 4: Evaluating the Statements
Given the above, the correct statement is that the editorial could be correct if the inflation experienced by Social Security recipients (due to the goods they consume) differs from the CPI inflation rate.
Final Answer
b. 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.
Key Concept
CPI Relevance
Key Concept Explanation
The Consumer Price Index (CPI) is crucial for adjusting payments to reflect inflation. However, its accuracy in reflecting individual experiences depends on how closely the consumer’s spending habits align with the goods and services the CPI measures. If there’s a mismatch, the adjustments may not accurately represent changes in living costs for specific groups, such as Social Security recipients.
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