Chapter 7 talks about GDP and CPI, and why the government would differentiate between nominal and real
measures of economic activity. In 2013, President Obama proposed changing the measure used to adjust tax
brackets and Social Security benefits to the “chained Consumer Price Index.” Read this article from US NEWS:
http://money.usnews.com/money/retirement/articles/2013/04/29/how-the-chained-cpi-affects-social-securitypayments
Write a short essay (no more than 2 pages) explaining:
1) what are real and nominal measures, and define CPI (an index that converts nominal measures to real
terms);
2) how chained CPI is different from regular CPI; which index (CPI or chained CPI) leads to smaller social
security payments;
3) discuss who benefits and who loses from this change, and why.
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