Question 1

Which of the following about Social Security is true?

Accepted Answer

Using the Social Security surplus to pay down the federal debt would reduce future taxes and make it easier to deal with the retirement of the baby boomers. Option A is not true, as only a portion of the revenues are needed for current retirees, and the rest is used for future benefits and administrative costs. Option C is not true, as most of the surplus was not used to reduce the national debt. Option D is also not true, as using the surplus for other government expenses does not necessarily ensure future funding for Social Security benefits.

Question 2

In 2015, the number of workers per Social Security beneficiary was approximately ____; by the year 2030, this figure is expected to ____.

Accepted Answer

In 2015, the number of workers per Social Security beneficiary was 2.8. This figure is expected to fall to approximately 2.2 by the year 2030. This is due to the aging of the U.S. population, which means that there will be fewer workers to support a larger number of retirees.

Question 3

The previous surplus of the Social Security system is expected to become a deficit because the

Accepted Answer

The number of workers relative to the number of Social Security recipients is expected to decline as the baby boom generation moves into the retirement phase of life, causing a decrease in the surplus of the Social Security system.

Question 4

As the baby boom generation, born during 1946 through 1960, reaches retirement age during the 2011 through 2030 period, the number of workers per Social Security beneficiary is expected to

Accepted Answer

As the baby boom generation retires, the number of workers per Social Security beneficiary is expected to decline significantly. This is due to the fact that the baby boomers represent a large cohort of workers, and there are simply not enough younger workers to replace them in the workforce. Therefore, the ratio of workers to retirees will decline, leading to fewer workers per Social Security beneficiary. This is expected to reach a low of approximately two workers per beneficiary by the year 2030.

Question 5

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

Accepted Answer

The answer of The Social Security system is currently generating...

Question 6

Given the current tax rate structure and promised benefit levels, persons that are currently 40 years old or younger can expect to earn approximately what real rate of return on their Social Security contributions?

Accepted Answer

The answer of Given the current tax rate structure and...

Question 7

The Social Security retirement program is financed by a 10.6 percent payroll tax that applies to earnings up to an income cutoff that is adjusted upward annually by the growth rate of nominal wages. As of 2016, the income cutoff was

Accepted Answer

The income cutoff for the Social Security payroll tax in 2016 was $118,500. This means that workers only pay the 10.6 percent payroll tax on their earnings up to $118,500 each year. Earnings above that amount are not subject to the Social Security tax. This income cutoff is adjusted upward each year based on the growth rate of nominal wages.

Question 8

The payments made to the beneficiaries of the Social Security program are financed by

Accepted Answer

The payments made to the beneficiaries of the Social Security program are financed by current receipts derived from the Social Security payroll tax, which is paid by current workers and their employers. Roughly 85% of Social Security's income comes from payroll taxes.

Question 9

The current Social Security System surplus of revenues relative to expenditures is used to purchase

Accepted Answer

The Social Security System surplus of revenues relative to expenditures is invested in U.S. Treasury bonds, which are considered to be low-risk investments with a relatively stable return. This helps ensure that the funds are available to pay future retirement and disability benefits.

Question 10

Demographic conditions

Accepted Answer

The baby boom generation refers to those born between 1946 and 1964, and they are currently approaching retirement age. This means that in the near future there will be a significant increase in the number of people retiring and collecting Social Security benefits, which will put a strain on the system. Therefore, demographic conditions will be less favorable for the Social Security system once the baby boom generation begins to retire.

Question 11

The Social Security system of the United States is based on the pay-as-you-go principle. This indicates that funding of the benefits paid to current retirees comes primarily from

Accepted Answer

The pay-as-you-go principle means that current retirees' benefits are primarily funded by the tax payments of current workers. Unlike a savings account, where individuals set aside money for their own retirement, Social Security operates by redistributing income from current workers to current retirees.

Question 12

By 2030, the number of workers per Social Security beneficiary will be approximately

Accepted Answer

The answer of By 2030, the number of workers per...

Question 13

Which of the following best explains why the Social Security system will face financial difficulties in the future?

Accepted Answer

The Social Security system relies on the contributions of current workers to pay benefits to retirees. As the number of workers paying into the system decreases relative to the number of retirees collecting benefits, the system will face financial difficulties.

Question 14

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

Accepted Answer

When the Social Security system enters its deficit years and the bonds held in the trust fund are drawn down, taxes will have to be raised (or additional funds will have to be borrowed) in order to redeem the bonds held in the trust fund. This is because the trust fund is essentially a collection of IOUs from the government to the Social Security system, and in order to pay out benefits, those IOUs need to be redeemed.

Question 15

When the Social Security surplus is used to cover the current operating expenses of the federal government, it will

Accepted Answer

When the Social Security surplus is used to cover current operating expenses of the federal government, it allows Congress and the president to spend more without raising current taxes or borrowing from the general public. This can lead to increased government spending without immediate consequences, but can also result in increased debt in the long run. It does not directly affect the provision of Social Security benefits to future retirees or the outstanding debt of the federal government.

Question 16

The Social Security program is primarily a

Accepted Answer

The Social Security program is designed to tax current workers in order to provide benefits for current retirees. It is a pay-as-you-go system, where current retirees are funded by current workers' payroll taxes. It is not a savings program or voluntary program, and it is not based on insurance principles.

Question 17

The current Social Security system works to the disadvantage of blacks primarily because the

Accepted Answer

The answer of The current Social Security system works to...

Question 18

Social Security, officially known as Old Age and Survivors Insurance (OASI),

Accepted Answer

Social Security is an intergenerational income transfer program, in which current workers pay into the system through payroll taxes, and those funds are then used to provide benefits to retired workers, their spouses and dependents, and survivors of deceased workers. It is not a voluntary savings program and is not based on the same principles as private insurance programs.

Question 19

During the last two decades, most of the surplus generated by the Social Security system was

Accepted Answer

The surplus generated by the Social Security system was used to finance current government expenditures, which means it was not invested in ways that would directly benefit future retirees. This has contributed to concerns about the long-term sustainability of the Social Security system.

Question 20

When the Social Security system begins running a deficit, the bonds in the trust fund will be drawn down. The funds to redeem these bonds will have to come from

Accepted Answer

When the Social Security system begins running a deficit, the bonds in the trust fund will be drawn down. The funds to redeem these bonds will have to come from higher taxes, spending reductions in other programs, or additional government borrowing. This is because the money in the trust fund has already been spent by the government on other programs, so it must find a way to pay back the Social Security system. The other options listed (B, C, and D) are not applicable in this situation.

Quiz 20: Special Topics