Question 1

What will the federal government have to do in order to redeem the bonds in the Social Security Trust Fund?

Accepted Answer

A) raise taxes 
B) cut expenditures on other government programs 
C) borrow additional funds 
D) Some combination of a, b, andc. 
A) raise taxes 
B) cut expenditures on other government programs 
C) borrow additional funds 
D) Some combination of a, b, andc.

Question 2

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

A) college graduates 
B) blacks 
C) persons with AIDS 
D) single males 
A) college graduates 
B) blacks 
C) persons with AIDS 
D) single males

Question 3

Which of the following is true?

Accepted Answer

A) Labor participation tends to increase as spousal earnings increase. 
B) Social Security works to the disadvantage of low-wage workers due to their shorter life expectancy. 
C) Low-wage workers derive a higher rate of return from their Social Security taxes than high-wage workers. 
D) High-wage workers generally begin full-time work at younger ages than low-wage workers. 
A) Labor participation tends to increase as spousal earnings increase. 
B) Social Security works to the disadvantage of low-wage workers due to their shorter life expectancy. 
C) Low-wage workers derive a higher rate of return from their Social Security taxes than high-wage workers. 
D) High-wage workers generally begin full-time work at younger ages than low-wage workers.

Question 4

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

A) 0 percent 
B) 2 percent 
C) 10 to 12 percent 
D) 15 to 20 percent 
A) 0 percent 
B) 2 percent 
C) 10 to 12 percent 
D) 15 to 20 percent

Question 5

When the current Social Security surpluses end and the bonds in the trust funds are reduced in order to make payments to retirees, the financing for the redemption of the trust fund bonds will come from

Accepted Answer

A) higher taxes or more government borrowing. 
B) the surplus funds deposited in government banking accounts. 
C) equity capital being liquidated. 
D) the sale of private equities and securities that the government has been purchasing with the funds. 
A) higher taxes or more government borrowing. 
B) the surplus funds deposited in government banking accounts. 
C) equity capital being liquidated. 
D) the sale of private equities and securities that the government has been purchasing with the funds.

Question 6

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

Accepted Answer

A) being invested in foreign bonds, which will provide Americans with a source of income when the baby boom generation retires. 
B) separated from other government revenue so politicians will not spend the money during the current period. 
C) being channeled into earmarked private savings accounts. 
D) invested in government bonds, the redemption of which will require an increase in taxes (or additional Treasury borrowing). 
A) being invested in foreign bonds, which will provide Americans with a source of income when the baby boom generation retires. 
B) separated from other government revenue so politicians will not spend the money during the current period. 
C) being channeled into earmarked private savings accounts. 
D) invested in government bonds, the redemption of which will require an increase in taxes (or additional Treasury borrowing).

Question 7

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

Accepted Answer

A) insurance premiums previously paid into the system by the beneficiaries. 
B) current receipts derived from the Social Security payroll tax. 
C) income derived from funds that were previously invested in stocks and bonds. 
D) governmental savings accounts based on the amount of funds the recipient previously paid into the system. 
A) insurance premiums previously paid into the system by the beneficiaries. 
B) current receipts derived from the Social Security payroll tax. 
C) income derived from funds that were previously invested in stocks and bonds. 
D) governmental savings accounts based on the amount of funds the recipient previously paid into the system.

Question 8

If the U.S. economy grew rapidly in the future, would this eliminate the long run deficit of Social Security?

Accepted Answer

A) No; future Social Security benefits are tied to nominal wages and therefore increases in real incomes will also increase the future retirement benefits. 
B) Yes; a rapid real growth rate would increase tax revenues without increasing the real benefit levels of future recipients. 
C) Yes, more rapid growth would lead to inflation and this would help eliminate the system's long run deficit. 
D) Yes, but only if the rapid growth led to a substantial increase in net exports. 
A) No; future Social Security benefits are tied to nominal wages and therefore increases in real incomes will also increase the future retirement benefits. 
B) Yes; a rapid real growth rate would increase tax revenues without increasing the real benefit levels of future recipients. 
C) Yes, more rapid growth would lead to inflation and this would help eliminate the system's long run deficit. 
D) Yes, but only if the rapid growth led to a substantial increase in net exports.

Question 9

Most married women who choose to work can expect to receive

Accepted Answer

A) substantially higher Social Security benefits than if they had not worked and thus not paid into the system. 
B) substantially lower Social Security benefits than if they had not worked and thus not paid into the system. 
C) approximately the same Social Security benefits than if they had not worked and thus not paid into the system. 
D) benefits based on their husbands' salary plus 50 percent of their own salary. 
A) substantially higher Social Security benefits than if they had not worked and thus not paid into the system. 
B) substantially lower Social Security benefits than if they had not worked and thus not paid into the system. 
C) approximately the same Social Security benefits than if they had not worked and thus not paid into the system. 
D) benefits based on their husbands' salary plus 50 percent of their own salary.

Question 10

When the Social Security system begins running a deficit during the years following 2018, the bonds in the trust fund will be drawn down. The funds to redeem these bonds will have to come from

Accepted Answer

A) higher taxes, spending reductions in other programs, or additional government borrowing. 
B) the surplus funds deposited in governmental banking accounts. 
C) equity capital being liquidated. 
D) the sale of private equities and securities that the government has been purchasing with the funds. 
A) higher taxes, spending reductions in other programs, or additional government borrowing. 
B) the surplus funds deposited in governmental banking accounts. 
C) equity capital being liquidated. 
D) the sale of private equities and securities that the government has been purchasing with the funds.

Question 11

Which of the following is true?

Accepted Answer

A) All of the current revenues flowing into the Social Security system are needed for benefit payments to current retirees. 
B) If the Social Security surplus was used to pay down the privately held federal debt, this would reduce future taxes and, thereby, make it easier to deal with the retirement of the baby boomers. 
C) During the 1980s and 1990s, most of the social security surplus was used to reduce the national debt. 
D) When the Social Security surplus is used to cover the current operating expenses of the federal government, it will make it easier for future taxpayers to provide promised Social Security benefits to baby boomers. 
A) All of the current revenues flowing into the Social Security system are needed for benefit payments to current retirees. 
B) If the Social Security surplus was used to pay down the privately held federal debt, this would reduce future taxes and, thereby, make it easier to deal with the retirement of the baby boomers. 
C) During the 1980s and 1990s, most of the social security surplus was used to reduce the national debt. 
D) When the Social Security surplus is used to cover the current operating expenses of the federal government, it will make it easier for future taxpayers to provide promised Social Security benefits to baby boomers.

Question 12

Which of the following is true?

Accepted Answer

A) The regressive nature of the Social Security benefit formula works to the disadvantage of blacks and other groups with below-average earnings. 
B) Social Security works to the disadvantage of blacks and other groups with below-average life expectancy. 
C) Blacks derive a higher rate of return from their Social Security taxes than whites. 
D) Hispanics derive a lower rate of return from their Social Security taxes than both whites and blacks. 
A) The regressive nature of the Social Security benefit formula works to the disadvantage of blacks and other groups with below-average earnings. 
B) Social Security works to the disadvantage of blacks and other groups with below-average life expectancy. 
C) Blacks derive a higher rate of return from their Social Security taxes than whites. 
D) Hispanics derive a lower rate of return from their Social Security taxes than both whites and blacks.

Question 13

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

A) increase to five. 
B) remain constant at approximately seven. 
C) decline to approximately five. 
D) decline to approximately two. 
A) increase to five. 
B) remain constant at approximately seven. 
C) decline to approximately five. 
D) decline to approximately two.

Question 14

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

Accepted Answer

A) collects funds from current workers and invests them in order to provide these workers with a stream of income during the retirement phase of life. 
B) is based on the same principles as private insurance programs. 
C) is an intergenerational income transfer program. 
D) is a voluntary savings program run by the government. 
A) collects funds from current workers and invests them in order to provide these workers with a stream of income during the retirement phase of life. 
B) is based on the same principles as private insurance programs. 
C) is an intergenerational income transfer program. 
D) is a voluntary savings program run by the government.

Exam 17: Appendix: the Economics of Social Security

What will the federal government have to do in order to redeem the bonds in the Social Security Trust Fund?

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

Which of the following is true?

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?

When the current Social Security surpluses end and the bonds in the trust funds are reduced in order to make payments to retirees, the financing for the redemption of the trust fund bonds will come from

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

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

If the U.S. economy grew rapidly in the future, would this eliminate the long run deficit of Social Security?

Most married women who choose to work can expect to receive

When the Social Security system begins running a deficit during the years following 2018, the bonds in the trust fund will be drawn down. The funds to redeem these bonds will have to come from

Which of the following is true?

Which of the following is true?

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

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

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Appendix: Government Spending and Taxation

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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