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

Question

Quizplus · Accepted Answer

A pay as you go social security system relies on current workers to fund benefits for current retirees, rather than investing in a future fund. If households ignore effects on future generations, they may not save as much for their own retirement, which leads to a decrease in national saving. This reduced saving can eventually lead to a reduction in the capital stock and productivity, affecting future standards of living.

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