Cost of Living Adjustment: History & Formula


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What is the Cost of Living Adjustment?

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1. In what year did President Nixon sign into law automatic COLAs based on the change in the consumer price index?

2. What is the relationship between CPI-W and COLA?

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About This Quiz & Worksheet

The 'cost of living adjustment' effects millions who work for the government and who receive government benefits, and this adjustment is necessary due to inflation. This quiz/worksheet will aid in your grasp of this topic. Some terms that you will be tested on include cost of living adjustment (or COLA), consumer price index, and Social Security benefits.

Quiz & Worksheet Goals

In these assessments, you'll be tested on the following:

  • The definition of COLA
  • In what year Nixon signed automatic COLAs into law
  • What CPI-W stands for
  • What the most recent COLA was
  • The COLA calculation formula for a monthly benefit

Skills Practiced

  • Information recall - access the knowledge you've gained regarding when the COLA is calculated
  • Knowledge application - use your knowledge to answer questions about how the amount of a social security benefit is determined
  • Problem solving - use acquired knowledge to solve COLA calculation practice problems
  • Interpreting information - verify that you can read information regarding the historical basis and need for the COLA and interpret it correctly

Additional Learning

To learn more about inflation and the cost of living adjustment, review the accompanying lesson on Cost of Living Adjustment History & Formula. This lesson covers the following objectives:

  • Understand the history behind the COLA and how inflation plays a large part in its existence
  • Recognize how the the COLA affects both federal employees and social security benefit recipients
  • Review how the CPI-W and the COLA streamline the process of increasing federal worker salaries and social security benefit recipients