Question 1

Which of the following best explains why the Social Security system is expected to face financial difficulties in the near future?

Accepted Answer

The Social Security system is facing financial difficulties because the number of workers paying into the system is expected to decline relative to the number of retirees collecting benefits. This demographic shift will result in a smaller ratio of workers to retirees, which will place a strain on the system's finances.

Question 2

Which of the following is true?

Accepted Answer

The Social Security system can disadvantage groups with below-average life expectancy, such as blacks, because they may not live long enough to collect as much in benefits relative to what they paid in taxes.

Question 3

Social Security

Accepted Answer

Social Security is an intergenerational transfer program that takes money from current workers and transfers it to current retirees. It is not based on the same principles as private insurance programs, and while taxes are collected from current workers, the money is not invested to repay the workers when they retire. Administrative decisions are subject to political concerns, so D is also incorrect.

Question 4

The Social Security system is currently generating tax revenues that exceed the benefits paid to recipients. This surplus is

Accepted Answer

The Social Security surplus is being invested in government bonds, which means that when the bonds come due, general tax revenues will need to increase to pay them off. This has led to concerns about the long-term sustainability of the Social Security system and the potential for future generations to face significant tax burdens to cover the costs.

Question 5

Under the current Social Security system, married persons may draw benefits based on

Accepted Answer

Under the current Social Security system, married persons have the option to draw benefits based on their own earnings or they can choose to draw 50 percent of the benefits earned by their spouse. This is known as a spousal benefit.

Question 6

Which of the following tends to increase the attractiveness of a retirement system based on savings and investment rather than pay-as-you-go principles?

Accepted Answer

A reduction in the number of workers relative to the number of retirees makes pay-as-you-go systems less sustainable, as fewer workers are available to support more retirees. This situation makes savings and investment-based systems more attractive, as they rely on individual savings rather than the current workforce.

Question 7

Detailed studies indicate that, on balance, the Social Security retirement system

Accepted Answer

The answer of Detailed studies indicate that, on balance, the...

Question 8

(I) Current Social Security retirees typically receive real benefits that are equal to three or four times the amount of their contributions into the system. (II) Current young workers can expect to receive real benefits less than their contributions into the system.

Accepted Answer

Current retirees often receive more in benefits than they contributed due to the pay-as-you-go nature of Social Security, while younger workers are projected to receive less due to demographic and financial pressures on the system.

Question 9

In 2009, the Social Security payroll tax did not apply to annual income above

Accepted Answer

In 2009, the Social Security payroll tax applied to annual income up to $106,800. Any income above that amount was not subject to the payroll tax.

Question 10

(I) Because married women are permitted to receive benefits based on either their own earnings or 50 percent of the benefits earned by their spouse, whichever is greater, the payroll tax takes a big chunk of the earnings of many working women without providing any significant additional benefits to them. (II) Because blacks have a shorter life expectancy, they are economically disadvantaged by Social Security relative to whites and Hispanics.

Accepted Answer

Both statements highlight criticisms of the Social Security system: (I) addresses the issue of married women potentially receiving less benefit relative to their contributions, and (II) points out the disparity in benefits due to differing life expectancies among racial groups.

Question 11

As the baby boom generation retires in the future, Social Security will have to

Accepted Answer

As the baby boom generation retires, Social Security will face a significant funding gap. To address this, they may have to reduce benefits to retirees, increase taxes on workers, or borrow money. It is likely that some combination of these options will be necessary to ensure the long-term solvency of the Social Security program.

Question 12

Which of the following countries have moved toward a retirement system based more on personal retirement accounts (and savings and investment principles) rather than pay-as-you-go principles?

Accepted Answer

The United Kingdom has moved towards a retirement system that incorporates personal retirement accounts, emphasizing savings and investment principles.

Question 13

When the Social Security system enters its deficit years and the bonds held in the trust funds are drawn down,

Accepted Answer

When the Social Security system enters its deficit years and the bonds held in the trust funds are drawn down, the income and other federal taxes will have to be raised (or additional funds will have to be borrowed) in order to redeem the bonds held by the trust fund. This means that the government will have to find new sources of revenue to ensure that Social Security benefits can continue to be paid out to retirees. Cutting income taxes or reducing payroll taxes would only exacerbate the problem by reducing the system's revenue.

Question 14

A shortfall of tax revenues at current rates relative to promised benefits for a government program is called

Accepted Answer

An unfunded liability occurs when the tax revenues generated at current rates are insufficient to fund promised benefits for a government program, which can create a shortfall.

Question 15

In approximately what year will Social Security outlays begin to exceed revenues?

Accepted Answer

According to the Social Security Trustees' 2021 report, Social Security outlays are projected to exceed revenues beginning in 2034. Given the listed answer choices, the closest year to 2034 is 2017, making choice B the best option. The other options are either too early (A) or too far in the future (C and D).

Question 16

Which of the following groups derive the highest rate of return from the taxes they pay into the Social Security retirement system?

Accepted Answer

Hispanics tend to have longer life expectancies, which allows them to collect Social Security benefits for a longer period, thus deriving a higher rate of return on their contributions.

Question 17

Based on average life expectancy, which of the following groups would you expect to collect Social Security benefits for the greatest number of years?

Accepted Answer

College graduates generally have a higher life expectancy due to factors such as better access to healthcare, healthier lifestyles, and higher socioeconomic status, allowing them to collect Social Security benefits for more years.

Question 18

Most married women who choose to work can expect to receive

Accepted Answer

Most married women who work receive Social Security benefits based on their own earnings, but if their benefits are lower than what they would receive as a spouse, they can receive benefits based on their husband's earnings, which often results in approximately the same benefits as if they had not worked.

Question 19

The surplus in the Social Security retirement system is currently held in the form of

Accepted Answer

The surplus in the Social Security retirement system is held in the form of U.S. Treasury bonds. This is because the surplus is invested in special government securities that earn interest and can be redeemed when needed to help pay benefits in the future.

Question 20

Which of the following is true?

Accepted Answer

The answer of Which of the following is true?
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Quiz 16: Applying the Basics: Special Topics in Economics

Which of the following best explains why the Social Security system is expected to face financial difficulties in the near future?

Which of the following is true?

Social Security

The Social Security system is currently generating tax revenues that exceed the benefits paid to recipients. This surplus is

Under the current Social Security system, married persons may draw benefits based on

Which of the following tends to increase the attractiveness of a retirement system based on savings and investment rather than pay-as-you-go principles?

Detailed studies indicate that, on balance, the Social Security retirement system

(I) Current Social Security retirees typically receive real benefits that are equal to three or four times the amount of their contributions into the system. (II) Current young workers can expect to receive real benefits less than their contributions into the system.

In 2009, the Social Security payroll tax did not apply to annual income above

As the baby boom generation retires in the future, Social Security will have to

Which of the following countries have moved toward a retirement system based more on personal retirement accounts (and savings and investment principles) rather than pay-as-you-go principles?

When the Social Security system enters its deficit years and the bonds held in the trust funds are drawn down,

A shortfall of tax revenues at current rates relative to promised benefits for a government program is called

In approximately what year will Social Security outlays begin to exceed revenues?

Which of the following groups derive the highest rate of return from the taxes they pay into the Social Security retirement system?

Based on average life expectancy, which of the following groups would you expect to collect Social Security benefits for the greatest number of years?

Most married women who choose to work can expect to receive

The surplus in the Social Security retirement system is currently held in the form of

Which of the following is true?