If households ignore effects on future generations, a pay as you go social security system:
A)increases consumption.
B)increases the capital stock in the long run.
C)increases national saving.
D)all of the above.

Question

Quizplus · Accepted Answer

A pay as you go social security system relies on current workers to pay for the benefits of current retirees. If households ignore the effects on future generations, they may consume more in the present instead of saving for their own retirement or contributing to the system. This increased consumption would lead to a decrease in national saving, which would ultimately reduce the capital stock in the long run. Therefore, option A is the only correct choice as it correctly identifies that such behavior would increase consumption.

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