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(Solved): the cost of living adjustment by the social security administration implies that wages and salaries ...



the cost of living adjustment by the social security administration implies that wages and salaries increase when

a) the real GDP increases

b) the rate of unemployment increases

c) the consumer price index (PI) increases

d) the nominal GDP increases



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The correct answer is c) the consumer price index (CPI) increases.

The Social Security Administration (SSA) uses the Consumer Price Index (CPI) to make cost-of-living adjustments (COLAs) to Social Security and Supplemental Security Income (SSI) benefits.


COLAs are automatic increases in benefits that are intended to protect recipients from losing purchasing power due to inflation. When the CPI increases, it indicates that the overall cost of living has risen. This prompts the SSA to adjust the benefits to keep pace with the inflationary impact on prices. Therefore, an increase in the CPI triggers a COLA to ensure beneficiaries maintain their purchasing power.


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