Deck 20: Social Security

Question 1

According to the benefit principle,the Social Security payroll tax is _____.According the ability-to-pay principle,the Social Security payroll tax is _____.

A)equitable;equitable
B)equitable;inequitable
C)inequitable;equitable
D)inequitable;inequitable

Answer 1

B

Question 2

Of the combined Social Security tax rate,_____ goes to pay for _____.

A)2.9;Medicaid
B)2.7;Medicare
C)2.9;Medicare
D)2.7;Medicaid

Answer 2

C

Question 3

If the entire Social Security payroll tax were paid by the employers _____

A)the workers would be better off
B)labor costs would increase
C)the price of all non-labor goods would rise
D)the employees after-tax wage would be unaffected

Answer 3

D

Question 4

If the entire Social Security payroll tax were paid the employees _____.

A)firms would be better off
B)more individuals would be self-employed
C)the nominal wage paid by employers would increase
D)the employees after-tax wage would fall

Question 5

Prior to 1984,which of the following groups were exempted from the Social Security program?

A)federal workers
B)Teamsters
C)members of Congress
D)a and c

Question 6

Which of the following are reasons why Social Security is compulsory?

A)A pay-as-you-go system needs new contributors to maintain solvency.
B)A pay-as-you go system cannot let older individuals opt out of benefits.
C)The adverse selection problem.
D)all of the above
E)a and c

Question 7

The Social Security program is unique in that employees can _____ the amount shown on their W-2 form and find out _____.

A)look at;their share of the cost of Social Security
B)double;their annual contributions to their retirement
C)look at;their annual contributions to their retirement
D)double;their share of the cost of Social Security

Question 8

To be eligible for Social Security benefits,an individual must have worked for _____ quarters in a covered job.

A)30
B)40
C)50
D)60

Question 9

The Social Security program is like a private pension plan in that _____.

A)it is a pay-as-you-go system
B)it is voluntary
C)benefits are a function of earlier contributions
D)you have a legal right to your benefits

Question 10

As a result of the pay-as-you-go nature of Social Security financing,the continuation of benefit payments is dependent upon _____.

A)new individuals entering the system
B)the current tax level
C)current economic growth rates
D)the Baby Boomer's decision on when to retire

Question 11

Social Security is financed through _____.

A)an earmarked payroll tax
B)an earmarked consumption tax
C)an earmarked income tax
D)general taxation

Question 12

The pay-as-you-go nature of the Social Security system means that _____.

A)current beneficiaries are paid out of general tax revenues
B)current beneficiaries are paid out of the payroll taxes levied on current workers
C)current beneficiaries are paid based on contributions made during their last five working years
D)current beneficiaries are paid out of current earnings on the Social Security trust fund

Question 13

The tax on Social Security is statutorily paid _____.

A)by individuals
B)by employers
C)two-thirds by individuals and one-third by employers
D)half by individuals and half by employers

Question 14

The official name of the Social Security program is _____.

A)Old Age,Survivors,Disability,and Health Insurance
B)Old Age,Dependents,Survivors,and Disability Insurance
C)Old Age,Dependents,Disability,and Health Insurance
D)Seniors,Survivors,Dependents,and Health Insurance

Question 15

The expansion of Social Security in 1956 added _____.

A)cash benefits to surviving dependents
B)disability insurance to those in the program
C)medical benefits to those over 65
D)medical benefits to surviving dependents

Question 16

The combined Social Security tax rate was _____ up to incomes of _____.

A)15.3 percent;$87,000
B)14.2 percent;$91,000
C)11.7 percent;$83,500
D)12.8 percent;$88,000

Question 17

Married couples with only one working spouse paying Social Security taxes will ______.

A)receive less in benefits than a single individual with the same lifetime payments
B)receive the same in benefits as a single individual with the same lifetime payments
C)receive more in benefits than a single individual with the same lifetime payments
D)receive more in cash benefits but less in health care benefits than a single individual with the same lifetime payments

Question 18

Social Security was established in

A)1902
B)1919
C)1935
D)1946

Question 19

In 2003,the Social Security tax was around _____ of total federal taxes.

A)17 percent
B)26 percent
C)31 percent
D)39 percent

Question 20

When Social Security first began,the required contribution levels were _____.

A)2 percent of a worker's pay for all income earned
B)2 percent of a worker's pay for the first $3,000 of income earned
C)1 percent of a worker's pay for the first $3,000 of income earned
D)1 percent of a worker's pay for all income earned

Question 21

Social Security is paid for by an earmarked payroll tax.

Question 22

The key determinant of whether Social Security will be a good investment is _____.

A)the number of hours worked by future employees
B)internal migration
C)real income growth in the United States
D)the solvency of the system today

Question 23

An individual paying twice as much in Social Security taxes over her lifetime as another individual would receive at least twice as much in Social Security benefits.

Question 24

Until 1950,the Social Security program spent ______ of its assets every year.

A)less than 10 percent
B)between 10 and 20 percent
C)between 20 and 30 percent
D)over 30 percent

Question 25

Social Security contributions are a tax on labor.

Question 26

Social Security _____.

A)reduces the incentive to save
B)increases the incentive to save
C)has no effect on saving
D)increases the incentive to save when population growth is falling and decreases the incentive to save when population growth is falling

Question 27

Future benefits for Social Security will ultimately be determined by _____.

A)population growth
B)individual decisions on when to retire
C)the existence of private accounts
D)voters through the political process

Question 28

Which of the following factors has negatively impacted the viability of the pay-as-you-go Social Security system?

A)Each generation is living longer and thus collecting more benefits.
B)The "baby boom" after WWII greatly increases the number of retirees in the first few decades of this century.
C)Individuals are having fewer children today.
D)all of the above
E)a and b

Question 29

An extra dollar into the Social Security trust fund _____.

A)increases the assets of the federal government by a dollar
B)decreases the assets of the federal government by a dollar
C)has no impact on the assets of the federal government
D)speeds up the time until insolvency of the trust fund

Question 30

Social Security is the second-largest government redistribution program.

Question 31

The level of today's Social Security payroll tax is significantly larger than initially envisioned.

Question 32

Since the Social Security benefits of retirees are a function of the taxes paid by others,it is easy to predict that _____.

A)older voters are likely to vote against higher taxes in exchange for higher benefits
B)older voters are likely to vote for higher taxes in exchange for higher benefits
C)older voters will be indifferent between higher taxes and higher benefits
D)older voters will generally not get what they want

Question 33

One way to restructure Social Security to meet its future obligations would be to _____.

A)lower the retirement age
B)reduce Social Security benefits
C)increase benefits only on the poor
D)eliminating pay-as-you-go

Question 34

A funded pension plan _____.

A)pays current beneficiaries from the contributions of current contributors
B)pays current beneficiaries from the contributions of new contributors
C)maintains assets equal to the present value of future liabilities
D)is functionally equivalent to a pay-as-you-go system,except for the pension plan is not compulsory

Question 35

In an unfunded pension system where current contributions are paid out to current beneficiaries,the total amount of funds available to invest _____ and the interest rate _____.

A)falls;falls
B)rises;rises
C)falls;rises
D)rises;falls

Question 36

An individual who works for 49 quarters in a covered job is eligible for Social Security benefits.

Question 37

Like other major government programs,an individual knows his contributions to Social Security from the information on his W-2 form.

Question 38

Given that the characteristics of Social Security are determined through the political process,we would expect that young workers would _____ when given the opportunity to vote on the program.

A)oppose increases in Social Security taxes
B)oppose increasing the retirement age
C)oppose means-testing of retirees
D)be strongly in favor of the status quo

Question 39

The OASDI trust fund is projected to sink below zero in ??_____.

A)2012
B)2021
C)2033
D)2045

Question 40

The Medicare tax is applied only to the first $87,000 of income.

Question 41

Explain how the Social Security program is partly an insurance plan and partly a form of welfare.

Question 42

During the 1980s,assets in the Social Security system fell so low they covered less than two months o f benefit payments.

Question 43

The Social Security trust fund is an asset to the federal government and a liability,simultaneously.

Question 44

Give two reasons why Social Security is compulsory for most workers.

Question 45

The unfunded nature of the Social Security system has no effect on investment.

Question 46

In 1950 there were 16 individuals contributing to Social Security for every one person collecting benefits.

Question 47

Explain the main difference between the pay-as-you-go system employed by Social Security and a private pension plan.

Question 48

Half of Social Security taxes are paid by the employer and half are paid by the employee.What would happen if the employer was made to pay the entire amount? Explain your reasoning.

Question 49

For an individual concerned with whether or not the Social Security system provides a good rate of return on the money paid into the system,she only needs to look at the return on investment for previous beneficiaries.

Question 50

Using a graph,illustrate the effect of an unfunded pension plan on the level of investment and the interest rate.Assume an annual amount going into the pension plan of R.What happens to interest rates and the level of investment? Explain your answer.

Question 51

In an apolitical world with a constant tax rate and program characteristics,the rate of return on Social Security contributions is equal to the growth in national income.

Question 52

In 1950,Social Security benefits increased by over 50 percent.