The main macroeconomic implication of a pay- as- you- go social securtiy system is:
A) total saving decreases and capital accumulation decreases.
B) no effect on total saving and capital accumulation decreases.
C) no effect on total saving and no effect on capital accumulation.
D) total saving increases and capital accumulation increases.
E) no effect on total saving and capital accumulation increases.

Question

Quizplus · Accepted Answer

In a pay-as-you-go social security system, current workers pay for the benefits of current retirees. This means that instead of contributing to savings and investment, the money is used to pay for current consumption. As a result, total saving decreases, and without sufficient saving and investment, capital accumulation also decreases.

The Main Macroeconomic Implication of a Pay- As- You- Go