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Imagine that after completing your economics course (you get an A, of course) you are at a family gathering. Your grandmother asks you about a news story she read this morning. The story explained that when the government adjusts Social Security payments for inflation, it generally uses the CPI-W, which is the Consumer Price Index for Urban Wage Earners and Clerical Workers. Because senior citizens spend a lot more than average on medical care, adjustments to their Social Security payments are not keeping up with their cost of living.

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Answer:

The Questions are as follows:

Your grandmother has two questions:

1. Last year I received $15,000 per year from the government. The story said that the CPI increased from 144 to 162. How much will I get this year?

2. Why might this additional money not allow me to maintain my standard of living?

Part 1-Before you answer your grandmother's questions, you first need to explain how the BLS (Bureau of Labor Statistics) calculates the CPI. "Well, Grandma, there are four basic steps. First, . . ."

Rank the following steps in order, from the first step to the last.

Part 2-Now explain how much money your grandmother will receive.

"Because the CPI increased from 144 to 162, you will now get $ ."

Part 3-Next, you need to explain the weights assigned to the different categories of expenditures, which are based on the spending patterns of the typical American.

Rank the following categories in order from highest to lowest weight in the CPI.

Part 4

Finally, you want to explain why adjustments to Grandma's Social Security payments might not be enough to cover the increase in her cost of living. Select the best explanation.

Explanation:

Part 1.

  • Come forward with a number of goods that an average consumer purchases.
  • Do consider the costs of the various goods and services.
  • Calculate the expense of the package for each period of time.
  • Change the basket cost into index number.

Part 2.

16875

Part 3.

  • Housing
  • Medical care
  • Recreation
  • Clothing

Part 4.

Elderly people are spending far more than the median on medical treatment compared to the average American, and medical treatment prices have risen more than the average price of all products.

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