As in the following table, consider someone who retired in 2006 with $25,000 in initial Social Security benefits per year, and that the actual inflation rate is 2 percent per year over the next 20 years. But now, suppose that the CPI overstates inflation by 2 full percentage points each year.
a. What would the real benefit payment be in 2026?
b. What would be the total percentage increase in the real benefit payment from 2006 to 2026?

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Benefits Indexed to Accurate Benefits Indexed to CPI (rising at 2%) Overstated CPI (rising at 3%) (2) Nominal (3) Real Annual (4) Nominal (5) Real Annual (1) Accurate Benefit, [(2) ÷ (1)] × 100 Annual Benefit Annual Benefit Benefit, Price Index (indexed at 2% per year) $25,000 (indexed at 3% per year) $25,000 [(4) ÷ (1)] x 00 $25,000 Year (2006 = 100) 2006 100.00 $25,000 2007 102.00 $25,500 $25,000 $25,750 $25,245 $25,493 $25,742 2008 104.04 $26,010 $26,532 $25,000 $25,000 $26,523 $27,318 2009 106.12 ... 2026 148.59 $37,149 $25,000 $45,153 $30,388