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The Consumer Price Index is used as a Cost of Living Index to adjust Social Security...

The Consumer Price Index is used as a Cost of Living Index to adjust Social Security Benefits. Research the CPI and discuss the implications of using the CPI as a COLA for Social Security recipients. Is it a good idea? Does it match the needs of the recipients? What happens when the CPI is negative?

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Answer #1

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The consumer price index (CPI) measure the average change in price over time that consumer pay for a basket of goods and services .

If CPI increases than COLA(cost of living adjustment) is made to social security recipients to counter the effect of inflation and to main their same living standard. Cost of living standards are equal to the percentage increase in the CPI for urban wage earners and clerical workers.

Yes it is good idea to counteract effect of inflation otherwise social security recipients have to lower down their living standard which is not a good idea.By paying COLA the recipients are able to match thier needs to present standard at least.

If CPI is negative then no COLA is made to social security recipients.  

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