Question

Social Security recipients receive an automatic cost-of-living adjustment (COLA) once each year. Their monthly benefit is increased by the amount that consumer prices increased during the preceding year. Suppose that consumer prices have increased by 5.4% during the preceding year.

(a) Express the adjusted monthly benefit of a Social Security recipient as a function of his or her current monthly benefit.
I(x) =

(b) If Harrington's monthly Social Security benefit is now $520, what will be his adjusted monthly benefit?
$

Answer 1

Answer:

Part A:

Social Security recipients receive an automatic cost-of-living adjustment (COLA) once each year.

Lets say that the benefit for the previous year was p, and a COLA of 5.4% is added, the new benefit will be  :

$p+0.054p=1.054p$

Part B:

Harrington's adjusted monthly benefit will be = $1.054(520)=548.08$ dollars.