Cost Of Living Adjustment. Students Name:. Institutional

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Cost of Living Adjustment
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Cost of living refers to the cost of maintaining a specific standard of living. Cost of living is a changing life-element over time and is normally interpreted in the form of cost of living index. Calculations pertaining cost of living are used in making comparisons between varying standards of living distributed within different geographic regions. Purchasing power parity rates provides a suitable solution towards finding accurate differences in cost of living between different locations.
The purpose of COLA is to ensure that the purchasing power accorded by the social security and supplementary security income (SSI) does not get scrapped off by the inflation …show more content…

Most of pension benefits, employment contracts, and government entitlement are entitled to Cost of Living Adjustments (COLA) clause which is responsible for increasing payments based on changes in the cost-of-living index (CPI) (Whittaker and Wayne, 2016). COLA interferes with the payments and is also tied to the cost-of-living-index that normally vary based on geographic location of the employee (Whittaker and Wayne, 2016).
Consumer price index is a crucial entity that influences cost of living adjustment. It is responsible in measuring the changes that occur in the price level of the market basket of both consumer goods and services normally purchased by households (Mulvey & Gengler, 2014). Market basket refers to the fixed list of items that is involved in tracking the progress of inflation in a given economy or specific market. Market basket is also regarded as a commodity bundle. Consumer Price Index is dependent of the fluctuations which occur in the prices of the goods specified and involved in market basket (Mulvey & Gengler, 2014). These sample of goods and services are intelligently selected from the market for accurate market judgements when measuring the consumer price index. Normally, the goods involved in these judgmental practices are the frequently bought items and household goods. Close observations are

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