If living costs rise annually at a rate of 3.5 percent,a person on a fixed pension would in twenty years be able to buy only one-half as many goods and services as he or she could at retirement.

Question

Quizplus · Accepted Answer

This statement is true. If living costs rise annually at a rate of 3.5 percent, the cost of goods and services will double every 20 years (because the rule of 72 gives us 72/3.5=20.57). Therefore, in twenty years, the purchasing power of a fixed pension would be reduced by half.

If Living Costs Rise Annually at a Rate of 3