If households ignore effects on future generations, a pay as you go social security system:
A)reduces current national savings.
B)reduces investment.
C)reduces the future capital stock.
D)all of the above.

Question

Quizplus · Accepted Answer

A pay as you go social security system is funded by current workers and used to pay for current retirees. If households ignore the effects on future generations, they will not save enough for their own retirement, reducing current national savings. This reduction in savings leads to a reduction in investment, which ultimately reduces the future capital stock. Thus, all the choices A, B, and C are correct.

If Households Ignore Effects on Future Generations, a Pay as You