Social Security recipients receive an automatic cost-of-living adjustment (COLA)
ID: 2870513 • Letter: S
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 4.1%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.
(b) If Harrington's monthly Social Security benefit is now $690, what will be his adjusted monthly benefit?
Explanation / Answer
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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
l(x) = x +.054x
l(540) = 540 + .054(520)
= 540.00 + 28.08
=568.08