Question 1

Which of the following was a recommendation or action of the Greenspan Commission in 1983?

Accepted Answer

The Greenspan Commission recommended that scheduled payroll tax increases should be accelerated to address the projected long-term financial shortfall of the Social Security system.

Question 2

Which of the following is equal to the present discounted value of Social Security's obligations minus the present discounted value of projected Social Security taxes over the next 75 years?

Accepted Answer

The answer of Which of the following is equal to...

Question 3

Suppose that someone wishes to address the problems with Social Security by allowing increased immigration.That approach is equivalent to:

Accepted Answer

Allowing increased immigration would increase the number of workers contributing to Social Security, which would expand the base of taxable wages. This would help to offset the demographic changes that are placing strain on the program. Raising taxes further, raising the retirement age, or lowering benefits for all recipients would all involve making cuts to the program or asking more of current workers and beneficiaries, whereas expanding the tax base through increased immigration would add new contributors without reducing benefits.

Question 4

Suppose someone argues that the problems faced by Social Security could be solved if we adjusted for the fact that people live longer than they used to,even given the changes to Social Security over that time.This is a reference to:

Accepted Answer

Adjusting for the fact that people live longer than they used to means that they are able to work for longer periods and therefore can delay retirement. Raising the retirement age would be the appropriate solution in this case. A) raising taxes further would increase the burden on current taxpayers, B) extending the base of taxable wages would require some workers to contribute more without receiving any immediate benefits, and D) lowering benefits for all recipients would put a greater burden on those who rely on Social Security as their primary source of income.

Question 5

For each of the following,determine which group would have higher Social Security Wealth (SSW),all other things equal.Explain your answers.
(a)male or female
(b)born in 1925 or born in 1985
(c)single or married
(d)low-wage earner or high-wage earner
(e)single-earner couple or double-earner couple

Accepted Answer

The answer of For each of the following,determine which group...

Question 6

In order to maintain a solvent pay-as-you-go Social Security system in the future:

Accepted Answer

The answer of In order to maintain a solvent pay-as-you-go...

Question 7

Suppose you are thinking about the implications of delaying retirement by one year.Which of the following provides you with an incentive to do so?

Accepted Answer

Delaying retirement by one year can increase your 35-year benefits average by replacing a low-wage earnings year with a high-earnings year. This can result in higher Social Security benefits in the future. The other options (B, C, D) do not provide an explicit incentive to delay retirement.

Question 8

In 1950,there were approximately __________ persons over the age of 65 for every 100 persons of working age.By 2050,there will be approximately ___________ persons over the age of 65 for every 100 persons of working age.

Accepted Answer

The answer of In 1950,there were approximately __________ persons over...

Question 9

Suppose that the primary insurance amount was changed so that it was indexed by the consumer price index minus 2 percentage points.Which approach to reforming Social Security would this be?

Accepted Answer

Indexing the primary insurance amount to the consumer price index minus 2 percentage points would result in lower benefits for all recipients, thus lowering benefits is the approach to reforming Social Security.

Question 10

In order to maintain a stable pay-as-you-go Social Security system when people are living longer:

Accepted Answer

To maintain a stable pay-as-go Social Security system when people are living longer, reducing average benefits and increasing the payroll tax rate can help balance the system by reducing outflows and increasing inflows, respectively.

Question 11

Existing research suggests that each dollar of Social Security wealth crowds out approximately__________ of private savings.

Accepted Answer

Existing research suggests that each dollar of Social Security wealth crowds out approximately $0.35 of private savings. This means that individuals tend to save less on their own when they have the safety net of Social Security, as they rely on that income for their retirement instead of saving more independently.

Question 12

If a politician suggested that Social Security benefits be means-tested,which of the following approaches is that politician suggesting?

Accepted Answer

Means-testing Social Security benefits would involve lowering benefits for higher-income groups, based on their ability to support themselves in retirement. This is different from options A and B, which involve increasing revenue or lowering benefits across the board, and option C would affect all recipients regardless of income level.

Question 13

Which of the following would be a benefit of privatizing Social Security?

Accepted Answer

Privatizing Social Security would give individuals more control over their investments and allow for varying degrees of risk aversion.

Question 14

If the ratio of people receiving Social Security benefits to the number of people paying Social Security taxes increases,then:

Accepted Answer

By increasing the maximum taxable earnings, there would be more people paying into the Social Security system, which could offset the increase in the number of people receiving benefits. This would allow benefits to be maintained at their present levels without needing to increase the payroll tax rate or decrease benefits.

Question 15

Which of the following is a reason behind the fiscal imbalance of Social Security?

Accepted Answer

Slow wage growth is a reason behind the fiscal imbalance of Social Security because the program's funding comes primarily from payroll taxes, which are calculated as a percentage of workers' earnings. If wages rise more slowly than the program's expenses, there will be less money for benefits.

Question 16

Which is a moral hazard effect of Social Security?

Accepted Answer

Social Security provides a retirement benefit that encourages workers to retire earlier than they would without it. This is a moral hazard effect because it incentivizes people to retire even if they are still capable and willing to work, potentially reducing their lifetime earnings and decreasing the size of the workforce.

Question 17

Which of the following is NOT true about poverty among the elderly and Social Security expenditure since 1959?

Accepted Answer

Poverty rates for the elderly have not been constantly decreasing over the past 50 years. While there have been significant reductions in poverty among the elderly since 1959, in recent years there has been a slight increase in poverty rates.

Question 18

Suppose that someone wishes to address the problems with Social Security by mandating that those now exempt from Social Security have to enroll.That approach is equivalent to:

Accepted Answer

Mandating that those who are currently exempt from Social Security have to enroll means extending the base of taxable wages, as more individuals will now be contributing to the Social Security system through payroll taxes. This would increase the amount of funding available for Social Security and help address its long-term solvency issues. Raising taxes further or lowering benefits for all recipients would have negative impacts on individuals and the economy, while raising the retirement age may not be feasible or fair for individuals in physically demanding jobs.

Question 19

If a politician proposed that Social Security be made more solvent by increasing the amount employers pay into the Social Security program,which approach is that politician advocating for the reform of Social Security?

Accepted Answer

This approach involves increasing the financial contributions required from employers, which effectively means raising taxes on those employers to fund Social Security.

Question 20

Explain the two fundamental problems related to investing the Social Security trust fund in the stock market.

Accepted Answer

The answer of Explain the two fundamental problems related to...

Quiz 13: Social Security