Deck 15: Social Security and Medicare: How Secure Is Our Safety Net for the Elderly

Question 1

If people choose to work fewer hours because the Social Security tax reduces their real wage,their behavior is dominated by the

A)Substitution effect
B)Bequest effect
C)Income effect
D)Wealth effect
E)Real wage effect

Answer 1

A

Question 2

As originally designed,Social Security was to be financed as a

A)Private insurance program
B)Pure income transfer program
C)Pay-as-you-go insurance program
D)Fully-funded insurance program
E)Means-tested benefits program

Answer 2

D

Question 3

The largest social insurance program in the United States is

A)Temporary Assistance for Needy Families
B)Social Security
C)Medicaid
D)Federal Flood Insurance
E)Job Corps

Answer 3

B

Question 4

In the United States,Social Security was established in when President signed the Social Security Act into law.

A)1903; Theodore Roosevelt
B)1929; Herbert Hoover
C)1965; Lyndon Johnson
D)1865; Abraham Lincoln
E)1935; Franklin Roosevelt

Question 5

The cost of living adjustment (COLA)employed by Social Security is based on the

A)Current level of GDP
B)Local rate of inflation
C)Consumer Price Index
D)Producer Price Index
E)Annual poverty threshold

Question 6

If people choose to work more hours because the Social Security tax reduces their real wage,their behavior is dominated by the

A)Substitution effect
B)Bequest effect
C)Income effect
D)Wealth effect
E)Real wage effect

Question 7

Currently,the total combined tax rate collected by Social Security is

A)21.6% of earnings
B)15.3% of earnings
C)7.65% of earnings
D)6.20% of earnings
E)1.45% of earnings

Question 8

How many Americans receive a monthly check from the Social Security Administration?

A)Fewer than 10 million
B)More than 50 million
C)About 27 million
D)Roughly 38 million
E)More than 100 million

Question 9

Which of the following is true concerning Social Security's retirement benefit structure?

A)All eligible retired workers are entitled to the same benefits
B)High wage workers receive a greater percentage of past earnings in benefits than low wage workers
C)Retired female workers are entitled to higher benefits than retired male workers
D)Low wage workers receive a greater percentage of past earnings in benefits than do high wage workers
E)Retired workers living in cities receive larger benefits than those living in rural areas

Question 10

Which of the following statements is true concerning the scope of the Social Security program?

A)Social Security has narrowed its scope over time to focus on the economic stability of the individual
B)The scope of Social Security has remained constant throughout its history
C)Social Security has broadened its scope over time to focus on the economic stability of the family
D)The scope of Social Security has always focused on the family unit
E)None of the above

Question 11

Which of the following nations was the first to offer its citizens a modern social insurance program?

A)United states
B)Great Britain
C)Russia
D)Germany
E)Japan

Question 12

Social Security taxes are

A)Paid only by workers
B)Levied on salaries and wages
C)Paid only by employers
D)Paid by both workers and employers
E)(b)and (d)

Question 13

How are Social Security tax revenues allocated today?

A)They are used to pay today's Social Security beneficiaries,and any extra is placed into the Social Security Trust Fund
B)All of today's revenues are placed in the Social Security Trust fund to pay for tomorrow's beneficiaries
C)Tax revenues are placed into accounts for each worker who will draw upon the balance when they retire
D)The revenues are invested in government securities and in the stock market
E)No one really knows

Question 14

Current projections estimate that the Social Security Trust Fund will be completely depleted

A)In late 2003
B)During 2010-2020
C)In about 100 years
D)Around 2100
E)Before 2040

Question 15

Most of today's college student population will be eligible to receive full Social Security retirement benefits when they reach the age of

A)62
B)65
C)67
D)70
E)72

Question 16

How many elderly households receive Social Security benefits?

A)More than 90%
B)Less than 50%
C)About 75%
D)Only about 15%
E)None of the above

Question 17

Government programs that guarantee citizens financial benefits for events beyond their personal control and that are financed through tax revenues are called

A)Social insurance programs
B)Entitlement programs
C)Private insurance programs
D)Welfare programs
E)Transfer programs

Question 18

Which of the following statements is FALSE?

A)20% of elderly households receive Social Security as their only source of income
B)Approximately 90% of elderly households receive Social Security benefits
C)Just under 30% of elderly households receive private pension benefits
D)For nearly two thirds of elderly households,Social Security represents more than 50% of total income
E)None of the abovE.All are true

Question 19

Given the way Social Security is financed,which of the following is true?

A)Social Security results in a transfer of income from the old to the young
B)Social Security results in a transfer of income from the young to the old
C)Social Security has a neutral effect on the nation's income distribution
D)The purchasing power of the elderly has been diminished by Social Security taxes
E)(a)and (d)

Question 20

The most significant factor that threatens the financial stability of the Social Security system is the

A)Increasing number of young workers
B)Relatively high rates of Social Security taxes
C)Population bulge created by the "baby boom" generation
D)Generosity of current Social Security benefits
E)Threat of foreign workers entering the U.S.due to NAFTA

Question 21

If inflation increases,what will happen to the Social Security COLA? It will

A)Expire
B)Increase
C)Decrease
D)Be divided among Social Security recipients
E)Be added to the Social Security trust fund

Question 22

The Following Questions Refer to the graph below.
The results of the wealth substitution effect are illustrated on the graph as a movement from point

A)E to F
B)A to C
C)E to G
D)F to E
E)None of the above

Question 23

If I put extra into a savings account so that I can leave assets to my children to compensate them for their payments into the Social Security system,I am exhibiting which of the following effects?

A)Retirement
B)Bequest
C)Wealth substitution
D)Opportunity cost
E)None of the above

Question 24

The effect of Social Security on personal savings is important because

A)The level of savings determines the pool of investment funds
B)Savings are necessary to finance the Social Security Trust Fund
C)Personal savings are negatively related to economic growth
D)Savings are a major source of income for all elderly households
E)The level of savings

Question 25

If a program's benefits are funded by interest earned on accumulated payments,it is which type of system?

A)An investment system
B)A fully funded scheme
C)An interest scheme
D)A pay-as-you-go system
E)An endowed system

Question 26

The Following Questions Refer to the graph below.
A movement from point E to point F as a result of Social Security would result in which of the following costs to society? A long-run movement to

A)PPC CD rather than GH
B)PPC GH rather than CD
C)Point B rather than point A
D)Point A rather than point B
E)I_F to C_F

Question 27

Empirical studies indicate that Social Security has

A)Increased the level of personal savings
B)Had a neutral effect on the level of personal savings
C)Reduced the level of personal savings
D)Increased the number of older workers
E)Raised the average age at which workers choose to retire

Question 28

If I spend more each year because I know that I will receive Social Security payments when I retire,I am exhibiting which of the following effects?

A)Retirement
B)Bequest
C)Wealth substitution
D)Opportunity cost
E)None of the above

Question 29

The Following Questions Refer to the graph below.
A change in consumption from C_E to C_F could be caused by which of the following?

A)The bequest effect
B)The retirement effect
C)The wealth substitution effect
D)All of the above
E)None of the above

Question 30

The Following Questions Refer to the graph below.
The results of the bequest effect are illustrated on the graph as a movement from point

A)E to F
B)A to C
C)E to G
D)F to E
E)None of the above

Question 31

Empirical evidence suggests that Social Security has _______ the overall supply of labor.

A)Had no effect on
B)Reduced
C)Increased
D)Stimulated
E)Done none of the above to

Question 32

The Following Questions Refer to the graph below.
The results of the retirement effect are illustrated on the graph as a movement from point

A)E to F
B)A to C
C)E to G
D)F to E
E)None of the above

Question 33

Social insurance uses tax revenues to guarantee citizens financial benefits for events including

A)Old age
B)Disability
C)Poor health
D)Death of a spouse
E)All of the above

Question 34

Social Security may increase the level of personal saving due to

A)The retirement effect
B)The bequest effect
C)The wealth substitution effect
D)(a)and (b)
E)(b)and (c)

Question 35

"An agreement to pay a premium to a company in return for a guarantee of financial benefits in the event of an undesired circumstance" defines

A)Social insurance
B)Private insurance
C)Private investment
D)Asset management
E)Retirement savings

Question 36

Why can't Social Security rely on a strict pay-as-you-go financial structure?

A)The current generation of workers is too small to support future retirees
B)A pay-as-you-go financial structure is inherently unstable
C)The current generation of retirees will bankrupt the system before the "baby boom" retires
D)Inflation erodes the value of contributions that must be saved to pay future retirees
E)None of the above

Question 37

The most significant argument against privatizing Social Security is that

A)Benefits would have to be cut
B)It has not worked in other countries
C)Future benefits levels cannot be guaranteed
D)It is too complicated to be practical
E)Taxes would have to be raised

Question 38

Why do some people favor investing the Social Security Trust Fund in the stock market?

A)Because for most beneficiaries the historic return on their Social Security taxes has been less than what would have been earned if those dollars were invested in the stock market
B)Because investment in the stock market will guarantee higher rates of return over the long run for all retirees
C)Because investments in the stock market carry very little risk and offer the potential for excessive short-run gains with little or no potential for loss
D)Because the stock market offers the safest form of investment
E)All of the above

Question 39

If I start saving more during my working life because I anticipate retiring earlier thanks to Social Security,I am exhibiting which of the following effects?

A)Retirement
B)Bequest
C)Wealth substitution
D)Opportunity cost
E)None of the above

Question 40

The most simple and direct way to postpone the looming Social Security financial crisis is to

A)Invest Social Security taxes in the stock market
B)Raise Social Security taxes and/or lower benefits
C)Privatize the Social Security Administration
D)Eliminate the Social Security system and force everyone to buy private insurance
E)Subsidize Social Security with general tax revenues

Question 41

Under most insurance systems,patients are responsible for which of the following payments for health care services?

A)Deductible
B)Co-insurance
C)Fee-for-service charges
D)All of the above
E)None of the above

Question 42

The Following Questions Refer to the graph below.
If medical care is provided free of charge,what quantity will be demanded?

A)0
B)2,000
C)2,800
D)4,000
E)An infinite amount

Question 43

The payment and delivery of health care service under a managed care system is based on

A)A fee-for-service market principle
B)A prearranged schedule of fixed prices
C)The ability to pay principle
D)Price negotiation between the consumer and provider
E)None of the above

Question 44

If a program's benefits are funded out of current payments,it is which type of system?

A)An investment system
B)A fully funded scheme
C)A pyramid scheme
D)A pay-as-you-go system
E)An endowed system

Question 45

When was the Medicare program established?

A)1935
B)1945
C)1955
D)1965
E)1975

Question 46

The Following Questions Refer to the graph below.
If medical care is provided free of charge,what quantity will be supplied?

A)0
B)50
C)2,000
D)2,800
E)4,000

Question 47

What percent of the average health care dollar spent in the United States comes directly from the consumer?

A)100
B)83
C)50
D)34
E)12

Question 48

The Following Questions Refer to the graph below.
The supply of medical services in this market is

A)Elastic
B)Inelastic
C)Unit elastic
D)Price elastic
E)Infinite

Question 49

Which of the following receives the largest share of expenditures made on health care in the United States?

A)Physicians
B)Nursing homes
C)Hospitals
D)Personal health care product and service providers
E)Pharmacies

Question 50

The Following Questions Refer to the graph below.
With a market allocation of medical services,equilibrium quantity will be

A)0
B)50
C)2,000
D)2,800
E)4,000

Question 51

A person with health insurance will tend to

A)Have a lower demand for health care services
B)Have a much greater concern for preventive care
C)Buy a lower quantity of health care at a higher price
D)Demand more health care services than a person without insurance
E)Do none of the above

Question 52

In a fee-for-service health care system,consumers pay the

A)Insurance company a fee every time they use a service
B)Full cost of the services they receive
C)HMO when they receive care
D)Doctor a small payment called a "co-pay."
E)Prearranged,fixed fee for services they receive

Question 53

Which of the following factors has contributed most to the tremendous increase in health care expenditures experience in the U.S.during the past fifty years?

A)Health care inflation
B)The aging of the population
C)Increased public support for health care
D)Private health insurance
E)Growth in Medicaid

Question 54

Part A of the Medicare program (Hospital Insurance)is financed primarily by

A)A monthly premium
B)A 2.9% tax levied on wages and salaries
C)An allocation from general tax revenues
D)User fees paid by patients
E)Insurance deductibles

Question 55

How are payments to health care providers determined under a managed care system? By the

A)Government
B)Market
C)Insurance company and the provider
D)Provider and the consumer
E)AMA (American Medical Association)

Question 56

Today,the health care sector of the U.S.economy accounts for about percent of national incomE.

A)3
B)5
C)8
D)12
E)18

Question 57

A potential benefit of managed care plans to Medicare enrollees is that these plans

A)Typically require less cost sharing
B)Provide a higher quality of health care
C)Provide a greater quantity of health care
D)Require less paper work
E)Do all of the above

Question 58

The Medicare program

A)Was established as a socialistic takeover of health care providers
B)Has reduced the demand for health care services
C)Affects persons 65 and older,regardless of income
D)Enrolls all poor people regardless of age
E)Does none of the above

Question 59

Which of the following is an example of a managed health plan?

A)HMO
B)PPO
C)POS
D)Physicians Network
E)All of the above

Question 60

Part C of the Medicare program (Medicare + Choice)

A)Provides health care plan choices to the beneficiaries of Medicare
B)Restricts Medicare beneficiaries to a simple fee-for-service health care plan
C)Provides comprehensive health insurance coverage for all poor people
D)Is only available to disabled retirees receiving Social Security
E)Does none of the above

Question 61

The Medicare Modernization Act,passed in 2003,established

A)the first long term care coverage for Medicare recipients
B)lowered deductibles for most Medicare recipients
C)added a prescription drug benefit to the Medicare program
D)instituted stringent price controls on the fees doctors and hospitals can charge
E)restricted the benefits that high income Medicare recipients can receive

Question 62

The Following Questions Refer to the graph below.
If a third party guarantees a maximum patient price of $25,what quantity of office visits will patients demand?

A)0
B)30
C)50
D)70
E)More than 70

Question 63

The Following Questions Refer to the graph below.
If patients pay the full price for of office visits,how many office visits will they make?

A)0
B)30
C)50
D)70
E)More than 70

Question 64

Programs that provide citizens with benefits for events that are beyond an individual person's control are called social insurance programs.

Question 65

If your deductible is $200 and you pay co-insurance of 20%,how much will you have to pay for a $3,000 hospital stay?

A)$200
B)$560
C)$600
D)$760
E)$800

Question 66

The original design of the Social Security system called for a pay-as-you-go financing schemE.

Question 67

The prescription drug benefit that is part of the Medicare Modernization Act of 2003 requires that recipients pay:

A)a monthly premium
B)a co-pay
C)a deductible
D)all of the above
E)none of the above,these benefits are provided to recipients at no charge

Question 68

Over time,Social Security has evolved to focus more on the family and less on the individual.

Question 69

If your insurance company agrees to pay a fixed fee for you to receive a given treatment (for example,$5,000 for an appendectomy),the company is using which of the following?

A)A fee-for-service system
B)A managed care system
C)A co-insurance system
D)A prospective payment system
E)A social insurance system

Question 70

A patient may be required to pay a percentage of the cost of their health care above the fixed fee they pay.This is known as

A)The deductible
B)Co-insurance
C)Fee-for-service
D)The health care tax
E)Medicare tax

Question 71

The United States was the first nation to provide social insurance programs for its citizens.

Question 72

Both Social Security and Medicare are social insurance programs.

Question 73

Health insurance results in

A)An increase in the quantity of health care demanded
B)An increase in the quantity of health care provided
C)An increase in the total cost of providing health care
D)All of the above
E)None of the above

Question 74

The Following Questions Refer to the graph below.
If a third party guarantees a maximum patient price of $25,how much must the third party pay per office visit?

A)$0
B)$25
C)$50
D)$75
E)More than $75

Question 75

The major underlying factor that endangers Social Security's financial stability is the population bulge created by the "baby boom" generation.

Question 76

If your deductible is $400 and you have co-insurance of 25%,how much will you have to pay for a $5,000 hospital stay?

A)$400
B)$1,150
C)$1,250
D)$1,550
E)$1,650

Question 77

Social insurance is private insurance purchased by the government.

Question 78

The Following Questions Refer to the graph below.
If patients pay the full price for office visits,what price will be charged in the market?

A)$0
B)$25
C)$50
D)$75
E)More than $75

Question 79

The Social Security Act was signed into law by President Franklin Roosevelt in 1935.

Question 80

The Following Questions Refer to the graph below.
If a third party guarantees a maximum patient price of $25,what total price must be paid per office visit to assure the quantity of office visits demanded will be provided?

A)$0
B)$25
C)$50
D)$75
E)More than $75