In what primary way are the Social Security cost-of –living adjustments a BENEFIT to our economy...

In what primary way are the Social Security cost-of –living adjustments a BENEFIT to our economy and to our society ? Why do you think so? (300-500 words)

Expert Solution

Social Security are benefits or grants to old-aged , disabled , survivors etc . The Social Security cost-of –living adjustments are made by indexing social security benefits for inflation . This is done based on the present Consumer Price Index . This adjustment is a benefit to our society because it maintains the purchsing power of people depndent on social security . Cost of living adjustments are necessary to maintain a particular standard of life . If it is not adjusted to inflation then the real value of the security is eroded away , purchasing power declines . In case of economy , this helps to maintain aggregate demand , if during rise in overall prices ( inflation ) people's real incomes remain same then overall demand declines . Adjustment of social security accrding to inflation maintains a constant level of aggregate demand which helps in economic growth . Social security acts as a fixed earnings for the people who are eligible to receive it . So inflation badly affects fixed earners . Hence government must take steps to adjust it accordingly .

Rahul Sunny answered 1 year ago

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