Question 1

The bequest effect tends to

Accepted Answer

A) cause a decrease in savings. 
B) cause people to retire early. 
C) cause an increase in savings. 
D) cause people to retire later. 
A) cause a decrease in savings. 
B) cause people to retire early. 
C) cause an increase in savings. 
D) cause people to retire later.

Question 2

Which of the following types of income are subject to FICA taxes?

Accepted Answer

A) Tips 
B) Capital gains 
C) Interest income 
D) Inheritance 
A) Tips 
B) Capital gains 
C) Interest income 
D) Inheritance

Question 3

During the 2008 Presidential campaign, candidate Barack Obama proposed

Accepted Answer

A) eliminating entirely the Social Security taxes paid by employers. 
B) reducing by one-half the Social Security tax rates on employers. 
C) raising the "income cap" for Social Security taxes from $106,800 to $250,000. 
D) re-imposing the 6.2% (old-age)Social Security tax on incomes over $250,000 per year. 
A) eliminating entirely the Social Security taxes paid by employers. 
B) reducing by one-half the Social Security tax rates on employers. 
C) raising the "income cap" for Social Security taxes from $106,800 to $250,000. 
D) re-imposing the 6.2% (old-age)Social Security tax on incomes over $250,000 per year.

Question 4

The solvency of Social Security can be extended if

Accepted Answer

A) the retirement age is reduced. 
B) the cap on taxable earnings is lowered. 
C) the trust fund invests in government bonds. 
D) the tax rate is increased. 
A) the retirement age is reduced. 
B) the cap on taxable earnings is lowered. 
C) the trust fund invests in government bonds. 
D) the tax rate is increased.

Question 5

If you overhear a group of people talking about their plans to save for their retirement and one of them says that it causes them to save less and the other says they will save more, you would conclude

Accepted Answer

A) that both are rational, they just have different perspectives. 
B) neither are rational, Social Security affects no one's saving. 
C) the person increasing saving is rational and the other is irrational. 
D) the person decreasing saving is rational and the other is irrational. 
A) that both are rational, they just have different perspectives. 
B) neither are rational, Social Security affects no one's saving. 
C) the person increasing saving is rational and the other is irrational. 
D) the person decreasing saving is rational and the other is irrational.

Question 6

If in 2016, a woman made $50,000 on the job, $20,000 from a consulting business she operated, and $25,000 in dividends on stock she owned, she would owe old-age Social Security taxes on

Accepted Answer

A) $50,000. 
B) $70,000. 
C) $87,000. 
D) $95,000. 
A) $50,000. 
B) $70,000. 
C) $87,000. 
D) $95,000.

Question 7

In 2011, which of the following temporary changes to Social Security was enacted to boost the economy?

Accepted Answer

A) Benefits were increased by 10%. 
B) The portion of payroll taxes paid by employees was reduced from 6.2% to 4.2%. 
C) The portion of payroll taxes paid by employers was reduced from 6.2% to 4.2%. 
D) The maximum taxable earnings was reduced to $40,000. 
A) Benefits were increased by 10%. 
B) The portion of payroll taxes paid by employees was reduced from 6.2% to 4.2%. 
C) The portion of payroll taxes paid by employers was reduced from 6.2% to 4.2%. 
D) The maximum taxable earnings was reduced to $40,000.

Question 8

In 2014 the Social Security Trust Fund held approximately

Accepted Answer

A) $3 trillion in cash. 
B) $3 trillion in government bonds. 
C) $3 trillion in stocks. 
D) $30 trillion in gold. 
A) $3 trillion in cash. 
B) $3 trillion in government bonds. 
C) $3 trillion in stocks. 
D) $30 trillion in gold.

Question 9

The 2016 Social Security Trustees' Report held that under intermediate assumptions the system would be bankrupt in

Accepted Answer

A) 2015. 
B) 2034. 
C) 2054. 
D) 2087. 
A) 2015. 
B) 2034. 
C) 2054. 
D) 2087.

Question 10

Which of the following types of income are subject to FICA taxes?

Accepted Answer

A) Business profit from the self-employed 
B) Interest earned on checking accounts 
C) Inheritance 
D) Profits earned from dividends 
A) Business profit from the self-employed 
B) Interest earned on checking accounts 
C) Inheritance 
D) Profits earned from dividends

Question 11

Using rate-of-return analysis to determine who benefits and who does not benefit from the current structure of Social Security is

Accepted Answer

A) embraced by all. 
B) embraced not only by financial planners, but also by most economists. 
C) rejected by everyone. 
D) rejected by those that view the program as social insurance, rather than as an investment. 
A) embraced by all. 
B) embraced not only by financial planners, but also by most economists. 
C) rejected by everyone. 
D) rejected by those that view the program as social insurance, rather than as an investment.

Question 12

Under Social Security the surplus (the excess of tax receipts over benefit payments)

Accepted Answer

A) is invested in stocks and corporate bonds. 
B) is invested in the form of US Treasury Notes (i.e. government debt). 
C) does not exist; the system runs at a deficit. 
D) is held in a "lockbox" for current workers when they retire. 
A) is invested in stocks and corporate bonds. 
B) is invested in the form of US Treasury Notes (i.e. government debt). 
C) does not exist; the system runs at a deficit. 
D) is held in a "lockbox" for current workers when they retire.

Question 13

Before Social Security 51 percent of men over age 65 worked; today that number is

Accepted Answer

A) 43 percent. 
B) 32 percent. 
C) 24 percent. 
D) 9 percent. 
A) 43 percent. 
B) 32 percent. 
C) 24 percent. 
D) 9 percent.

Question 14

Social Security was intended to

Accepted Answer

A) cover all of the income necessary for retirement. 
B) provide retirement income for only those who did not save for themselves. 
C) provide retirement income for only those without private pensions. 
D) provide a safety net of retirement income to which recipients would add their savings and pensions. 
A) cover all of the income necessary for retirement. 
B) provide retirement income for only those who did not save for themselves. 
C) provide retirement income for only those without private pensions. 
D) provide a safety net of retirement income to which recipients would add their savings and pensions.

Question 15

If you index Social Security benefits for prices rather than wages, this is likely to

Accepted Answer

A) reduce benefits. 
B) increase benefits. 
C) prevent Social Security bankruptcy altogether. 
D) bring about Social Security bankruptcy earlier. 
A) reduce benefits. 
B) increase benefits. 
C) prevent Social Security bankruptcy altogether. 
D) bring about Social Security bankruptcy earlier.

Question 16

If in 2016, a woman made $100,000 on the job, $20,000 from a consulting business she operated, and $10,000 in dividends on stock she owned, she would owe old-age Social Security taxes on

Accepted Answer

A) $87,000. 
B) $97,500. 
C) $118,500. 
D) $130,000. 
A) $87,000. 
B) $97,500. 
C) $118,500. 
D) $130,000.

Question 17

A pay-as-you-go system

Accepted Answer

A) has current retirees being paid out of the taxes of current workers. 
B) has a sufficient amount of money on hand currently to pay out all future obligations. 
C) has current retirees being paid out of the taxes of current workers and has a sufficient amount of money on hand currently to pay out all future obligations. 
D) always requires a trust fund. 
A) has current retirees being paid out of the taxes of current workers. 
B) has a sufficient amount of money on hand currently to pay out all future obligations. 
C) has current retirees being paid out of the taxes of current workers and has a sufficient amount of money on hand currently to pay out all future obligations. 
D) always requires a trust fund.

Question 18

Which of the following parts of Social Security was not part of the original program?

Accepted Answer

A) Medicare 
B) Benefits to orphans 
C) Benefits to widows 
D) Retirement benefits 
A) Medicare 
B) Benefits to orphans 
C) Benefits to widows 
D) Retirement benefits

Question 19

In 1982, the retirement age was raised in such a manner that it is 65 for everyone born before 1938

Accepted Answer

A) and 70 for everyone else. 
B) and 67 for everyone else. 
C) and 70 for everyone born in 1960 or after, with a gradual increase in between. 
D) and 67 for everyone born in 1960 or after, with a gradual increase in between. 
A) and 70 for everyone else. 
B) and 67 for everyone else. 
C) and 70 for everyone born in 1960 or after, with a gradual increase in between. 
D) and 67 for everyone born in 1960 or after, with a gradual increase in between.

Question 20

The solvency of Social Security can be extended if

Accepted Answer

A) the retirement age is reduced. 
B) the cap on taxable earnings is lowered. 
C) the trust fund invests in private corporate securities. 
D) the tax rate is reduced. 
A) the retirement age is reduced. 
B) the cap on taxable earnings is lowered. 
C) the trust fund invests in private corporate securities. 
D) the tax rate is reduced.

Exam 40: Social Security

The bequest effect tends to

Which of the following types of income are subject to FICA taxes?

During the 2008 Presidential campaign, candidate Barack Obama proposed

The solvency of Social Security can be extended if

If you overhear a group of people talking about their plans to save for their retirement and one of them says that it causes them to save less and the other says they will save more, you would conclude

If in 2016, a woman made $50,000 on the job, $20,000 from a consulting business she operated, and $25,000 in dividends on stock she owned, she would owe old-age Social Security taxes on

In 2011, which of the following temporary changes to Social Security was enacted to boost the economy?

In 2014 the Social Security Trust Fund held approximately

The 2016 Social Security Trustees' Report held that under intermediate assumptions the system would be bankrupt in

Which of the following types of income are subject to FICA taxes?

Using rate-of-return analysis to determine who benefits and who does not benefit from the current structure of Social Security is

Under Social Security the surplus (the excess of tax receipts over benefit payments)

Before Social Security 51 percent of men over age 65 worked; today that number is

Social Security was intended to

If you index Social Security benefits for prices rather than wages, this is likely to

If in 2016, a woman made $100,000 on the job, $20,000 from a consulting business she operated, and $10,000 in dividends on stock she owned, she would owe old-age Social Security taxes on

A pay-as-you-go system

Which of the following parts of Social Security was not part of the original program?

In 1982, the retirement age was raised in such a manner that it is 65 for everyone born before 1938

The solvency of Social Security can be extended if

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