Social Security may increase the level of personal saving due to
A)The retirement effect
B)The bequest effect
C)The wealth substitution effect
D)(a)and (b)
E)(b)and (c)

Question

Quizplus · Accepted Answer

The retirement effect is a powerful force that may lead individuals to save more money as they prepare for retirement. As they approach retirement age, people may become more aware of the need to save money for the future, and Social Security may provide an incentive to do so. The bequest effect may also increase personal saving, as individuals look to accumulate wealth to pass on to their heirs. Therefore, both (a) and (b) are correct. The wealth substitution effect, on the other hand, suggests that Social Security may decrease personal saving because individuals view it as a substitute for personal savings. Therefore, (c) is not correct. Consequently, the correct answer is (D).

Social Security May Increase the Level of Personal Saving Due