Question 1

If you save less because the government is going to tax you and later provide you with a benefit, then this reduction in savings is referred to by economists as the

Accepted Answer

A) slovenly effect. 
B) bequest effect. 
C) induced retirement effect. 
D) asset substitution effect. 
A) slovenly effect. 
B) bequest effect. 
C) induced retirement effect. 
D) asset substitution effect.

Question 2

If you save more because Social Security allows you to retire earlier than you would have retired had Social Security neither taxed you nor provided you with benefits, then this is referred to by economists as the

Accepted Answer

A) slovenly effect. 
B) bequest effect. 
C) induced retirement effect. 
D) asset substitution effect. 
A) slovenly effect. 
B) bequest effect. 
C) induced retirement effect. 
D) asset substitution effect.

Question 3

Present value analysis suggests that the real rate of return on Social Security is

Accepted Answer

A) more than 10% for high income earners. 
B) around 10% for workers of all income levels. 
C) roughly 3% for low income earners and negative for high income earners. 
D) roughly 3% for high income earners and negative for low income earners. 
A) more than 10% for high income earners. 
B) around 10% for workers of all income levels. 
C) roughly 3% for low income earners and negative for high income earners. 
D) roughly 3% for high income earners and negative for low income earners.

Question 4

The workers per retiree ratio

Accepted Answer

A) had been above 16 prior to 1950 and is now around 1. 
B) had been above 16 prior to 1950 and is now around 3. 
C) had been above 16 prior to 1950 and is now around 10. 
D) had been above 16 prior to 1950 and is now around 20. 
A) had been above 16 prior to 1950 and is now around 1. 
B) had been above 16 prior to 1950 and is now around 3. 
C) had been above 16 prior to 1950 and is now around 10. 
D) had been above 16 prior to 1950 and is now around 20.

Question 5

In terms of Social Security taxes, the self-employed pay,

Accepted Answer

A) only the employee portion. 
B) only the employer portion. 
C) both the employee and employer portions. 
D) no tax. 
A) only the employee portion. 
B) only the employer portion. 
C) both the employee and employer portions. 
D) no tax.

Question 6

Because of Social Security, people are retiring

Accepted Answer

A) earlier than ever. 
B) later than ever. 
C) at the same age they always did: 65. 
D) in their forties and getting government retirement benefits. 
A) earlier than ever. 
B) later than ever. 
C) at the same age they always did: 65. 
D) in their forties and getting government retirement benefits.

Question 7

One argument offered by economists for having a Social Security system is that if there were no Social Security, workers might

Accepted Answer

A) work too long. 
B) not fully comprehend how hard it might be to continue working into their 70s. 
C) save too much. 
D) overestimate the value of retirement. 
A) work too long. 
B) not fully comprehend how hard it might be to continue working into their 70s. 
C) save too much. 
D) overestimate the value of retirement.

Question 8

If in 2016, a woman made $90,000 on the job, $30,000 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) $80,000. 
B) $97,500. 
C) $118,500 
D) $120,000. 
A) $80,000. 
B) $97,500. 
C) $118,500 
D) $120,000.

Question 9

The precipitous fall in stock prices between March 2000 and December 2002

Accepted Answer

A) emboldened those in favor of partial privatization of Social Security. 
B) greatly affected the payouts associated with Social Security. 
C) undercut political support for partial privatization of Social Security. 
D) caused the government to increase Social Security payments. 
A) emboldened those in favor of partial privatization of Social Security. 
B) greatly affected the payouts associated with Social Security. 
C) undercut political support for partial privatization of Social Security. 
D) caused the government to increase Social Security payments.

Question 10

A fully-funded 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) never needs to run a surplus. 
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) never needs to run a surplus.

Question 11

The solvency of Social Security can be extended if

Accepted Answer

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

Question 12

The solvency of Social Security can be extended if

Accepted Answer

A) the retirement age is reduced. 
B) the program is means tested. 
C) the cap on taxable earnings is lowered. 
D) the tax rate is reduced. 
A) the retirement age is reduced. 
B) the program is means tested. 
C) the cap on taxable earnings is lowered. 
D) the tax rate is reduced.

Question 13

For 2016, the maximum taxable income for Social Security purposes is

Accepted Answer

A) $51,125. 
B) $97,500. 
C) $118,500. 
D) unlimited. 
A) $51,125. 
B) $97,500. 
C) $118,500. 
D) unlimited.

Question 14

The net effect of savings of the asset substitution, induced retirement and bequest effects combined is that people save ________they would have without Social Security.

Accepted Answer

A) slightly less than 
B) more than 
C) the same as 
A) slightly less than 
B) more than 
C) the same as

Question 15

The solvency of Social Security can be extended if

Accepted Answer

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

Question 16

The monthly average of the 35 highest earnings years adjusted for wage inflation is the

Accepted Answer

A) AIME. 
B) PIA. 
C) amount of the retiree's monthly check. 
D) the most the retiree can receive in interest without having part of their benefit reduced. 
A) AIME. 
B) PIA. 
C) amount of the retiree's monthly check. 
D) the most the retiree can receive in interest without having part of their benefit reduced.

Question 17

Indexing Social Security benefits for prices rather than wages would

Accepted Answer

A) reduce benefits drastically and immediately. 
B) reduce benefits slowly (by about 1% per year)over time. 
C) have no impact on benefits. 
D) increase benefits. 
A) reduce benefits drastically and immediately. 
B) reduce benefits slowly (by about 1% per year)over time. 
C) have no impact on benefits. 
D) increase benefits.

Question 18

The event that occurred in the second term of President George W. Bush which effectively halted discussions of Social Security reform was

Accepted Answer

A) the invasion of Iraq. 
B) the surge in Iraq. 
C) Hurricane Katrina. 
D) a breakdown of political stability in Afghanistan. 
A) the invasion of Iraq. 
B) the surge in Iraq. 
C) Hurricane Katrina. 
D) a breakdown of political stability in Afghanistan.

Question 19

Calculations make it clear that for the majority of current retirees, the rate of return on Social Security taxes and benefits was

Accepted Answer

A) lower than what would have been generated in private stock-market investments. 
B) roughly equal to what would have been generated in private stock-market investments. 
C) greater than what would have been generated in private stock-market investments. 
D) riskier than what would have been generated in private stock market investments. 
A) lower than what would have been generated in private stock-market investments. 
B) roughly equal to what would have been generated in private stock-market investments. 
C) greater than what would have been generated in private stock-market investments. 
D) riskier than what would have been generated in private stock market investments.

Question 20

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 because, as they reason it, "the government is saving for me" you would attribute this to the

Accepted Answer

A) slovenly effect. 
B) bequest effect. 
C) induced retirement effect. 
D) asset substitution effect. 
A) slovenly effect. 
B) bequest effect. 
C) induced retirement effect. 
D) asset substitution effect.

Exam 40: Social Security

If you save less because the government is going to tax you and later provide you with a benefit, then this reduction in savings is referred to by economists as the

If you save more because Social Security allows you to retire earlier than you would have retired had Social Security neither taxed you nor provided you with benefits, then this is referred to by economists as the

Present value analysis suggests that the real rate of return on Social Security is

The workers per retiree ratio

In terms of Social Security taxes, the self-employed pay,

Because of Social Security, people are retiring

One argument offered by economists for having a Social Security system is that if there were no Social Security, workers might

If in 2016, a woman made $90,000 on the job, $30,000 from a consulting business she operated, and $10,000 in dividends on stock she owned, she would owe old-age Social Security taxes on

The precipitous fall in stock prices between March 2000 and December 2002

A fully-funded system

The solvency of Social Security can be extended if

The solvency of Social Security can be extended if

For 2016, the maximum taxable income for Social Security purposes is

The net effect of savings of the asset substitution, induced retirement and bequest effects combined is that people save ________they would have without Social Security.

The solvency of Social Security can be extended if

The monthly average of the 35 highest earnings years adjusted for wage inflation is the

Indexing Social Security benefits for prices rather than wages would

The event that occurred in the second term of President George W. Bush which effectively halted discussions of Social Security reform was

Calculations make it clear that for the majority of current retirees, the rate of return on Social Security taxes and benefits was

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 because, as they reason it, "the government is saving for me" you would attribute this to the

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