Question

A newspaper article once reported that the u.s. economy was experiencing a low rate of inflation. it said that "low inflation has a downside: 45 million recipients of social security and other benefits will see their checks go up by just 2.8 percent next year."

a. why would policymakers link increases in social security and other benefits to inflation?
b. is the small increase in benefits a "downside" of low inflation, as the article suggests? why or why not?

Answer 1

I think policymakers would link social security payments to inflation to help the recipients with the increased cost of living due to inflation of prices also. I don't think small increases due to a low rate of inflation is a downside because the low rate of inflation means goods and services will not increase much in price so will still be relatively affordable.