Which of the following will be a long run impact of a pay-as-you-go Social Security program?
A)A shortage in the labor market
B)A sluggish growth in the capital stock of the economy
C)An increase in the gross domestic product
D)An increase in the average wage rate

Question

Quizplus · Accepted Answer

A pay-as-you-go Social Security program can potentially discourage saving and investment, leading to a lower capital stock and therefore slower economic growth in the long run. This is because current workers' contributions are used to pay for current retirees' benefits, rather than being invested to grow the economy. A shortage in the labor market (A) is unlikely to be a long run impact of Social Security. An increase in GDP (C) and an increase in average wage rate (D) are not necessarily directly impacted by the pay-as-you-go nature of Social Security.

Which of the Following Will Be a Long Run Impact