If households ignore effects on future generations, a pay as you go social security system:
A)raises investment.
B)reduces GDP in the long run.
C)raises private 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 and do not save enough for their own retirement, this can lead to a smaller workforce in the future and a smaller tax base to fund the social security system. This could ultimately reduce GDP in the long run as fewer workers can support a smaller retired population.

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