Statement I: Social Security recipients are protected against inflation.
Statement II: If the nominal interest rate accurately reflects the inflation rate,then inflation has been fully anticipated and no one wins or loses.

Question

Quizplus · Accepted Answer

Social Security benefits in the United States are adjusted annually for inflation through the Cost-of-Living Adjustment (COLA), protecting recipients against the loss of purchasing power. Statement II is true because if the nominal interest rate equals the inflation rate, the real interest rate (the nominal rate adjusted for inflation) effectively becomes zero, meaning the purchasing power of the money saved or borrowed remains unchanged, assuming inflation expectations are fully incorporated into the nominal rate.

Statement I: Social Security Recipients Are Protected Against Inflation