Question 1

It is generally thought that the earnings penalty will:

Accepted Answer

A)  only have an impact on the number of hours that younger workers are willing to work. 
B)  have a large negative impact on the number of hours that older workers are willing to work. 
C)  have an insignificant effect on the number of hours that older workers are willing to work. 
D)  cause older workers to retire from the labor force at an earlier age. 
A)  only have an impact on the number of hours that younger workers are willing to work. 
B)  have a large negative impact on the number of hours that older workers are willing to work. 
C)  have an insignificant effect on the number of hours that older workers are willing to work. 
D)  cause older workers to retire from the labor force at an earlier age.

Question 2

An effect that induces workers to substitute Social Security wealth for other types of wealth that could be financed by saving is:

Accepted Answer

A)  the wealth substitution effect. 
B)  the induced retirement effect. 
C)  the bequest effect. 
D)  the income effect. 
A)  the wealth substitution effect. 
B)  the induced retirement effect. 
C)  the bequest effect. 
D)  the income effect.

Question 3

Which of the following statements concerning Social Security is correct?

Accepted Answer

A)  Workers and employers appear to share the burden of the payroll tax equally. 
B)  Rates of return based only on monetary benefits and costs average 4-5%. 
C)  Rates of return based only on monetary benefits and costs average 1-2%. 
D)  There are no non-monetary benefits associated with Social Security. 
A)  Workers and employers appear to share the burden of the payroll tax equally. 
B)  Rates of return based only on monetary benefits and costs average 4-5%. 
C)  Rates of return based only on monetary benefits and costs average 1-2%. 
D)  There are no non-monetary benefits associated with Social Security.

Question 4

According to the wealth substitution effect, Social Security allows parents to leave their children a bigger bequest, thereby reducing the children's incentive to save.

Accepted Answer

A) True 
 B)False

Question 5

According to Martin Feldstein, Social Security has not had a significant impact on household savings.

Accepted Answer

A) True 
 B)False

Question 6

The sum of 35 years of indexed earnings divided by 420 determines:

Accepted Answer

A)  the rate of return. 
B)  the social benefit. 
C)  primary insurance amount. 
D)  average indexed monthly earnings. 
A)  the rate of return. 
B)  the social benefit. 
C)  primary insurance amount. 
D)  average indexed monthly earnings.

Question 7

Estimates indicate that more than 45 percent of the elderly would have incomes below the federal poverty line in the absence of Social Security.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is characteristic of Social Security?

Accepted Answer

A)  Its benefits are indexed for inflation. 
B)  It has historically been a pay-as-you-go insurance plan. 
C)  Its benefits are not based solely on of individual contribution. 
D)  All of the above. 
A)  Its benefits are indexed for inflation. 
B)  It has historically been a pay-as-you-go insurance plan. 
C)  Its benefits are not based solely on of individual contribution. 
D)  All of the above.

Question 9

The income effect of a wage decrease says that when wages fall, workers must work more hours in order to make up for their wage reduction.

Accepted Answer

A) True 
 B)False

Question 10

"The prospect of Social Security benefits has induced workers to retire at earlier ages." Is this statement true or False? Defend your answer.

Accepted Answer

It is True that the labor force particip

Question 11

Sara earned $10,000 at age 40. Assume that the average national wage when Sara was age 60 is $39,800, and is $15,000 when she was age 40. The indexed value of earnings is:

Accepted Answer

A)  $26,350. 
B)  $27,350. 
C)  $26,530. 
D)  $25,400. 
A)  $26,350. 
B)  $27,350. 
C)  $26,530. 
D)  $25,400.

Question 12

Projections show the OASI Trust Fund being exhausted by the year 2050.

Accepted Answer

A) True 
 B)False

Question 13

Studies clearly indicate that Social Security has had a significant adverse effect on savings.

Accepted Answer

A) True 
 B)False

Question 14

The ratio of primary insurance amount (PIA) to average indexed monthly earnings (AIME) decreases as income increases.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is False?

Accepted Answer

A)  A cut in Social Security benefits of 12.8 percent for each of the next 75 years would close the 75-year funding gap 
B)  If started now, the long-run Social Security deficit could be avoided by raising taxes. 
C)  If all surplus funds in the Social Security Trust Fund were invested in private securities, the long-run Social Security deficit would be eliminated. 
D)  Increasing the retirement age by four years would help finance pension liabilities. 
A)  A cut in Social Security benefits of 12.8 percent for each of the next 75 years would close the 75-year funding gap 
B)  If started now, the long-run Social Security deficit could be avoided by raising taxes. 
C)  If all surplus funds in the Social Security Trust Fund were invested in private securities, the long-run Social Security deficit would be eliminated. 
D)  Increasing the retirement age by four years would help finance pension liabilities.

Question 16

Most private retirement plans are indexed for inflation and receive preferential tax treatment in the federal tax codes.

Accepted Answer

A) True 
 B)False

Question 17

Social Security benefits are:

Accepted Answer

A)  indexed to account for changes in average national wages between the year the earnings were realized and age 55. 
B)  indexed to account for changes in average national wages between the year the earnings were realized and age 60. 
C)  indexed to account for changes in average national wages between the year the earnings were realized and age 65. 
D)  indexed to account for changes in average national wages between the year the earnings were realized and age 70. 
A)  indexed to account for changes in average national wages between the year the earnings were realized and age 55. 
B)  indexed to account for changes in average national wages between the year the earnings were realized and age 60. 
C)  indexed to account for changes in average national wages between the year the earnings were realized and age 65. 
D)  indexed to account for changes in average national wages between the year the earnings were realized and age 70.

Question 18

Use the following diagram to answer the following questions.
  
-Refer to Payroll. Suppose there is no payroll tax in effect, which demand curve represents the value of the output produced by labor?

Accepted Answer

A)  Da. 
B)  Db. 
C)  S₁ 
D)  This cannot be determined from the above diagram. 
A)  Da. 
B)  Db. 
C)  S₁ 
D)  This cannot be determined from the above diagram.

Question 19

Because Social Security is a risky investment, its real rate of return is below the real rate of return of private investments.

Accepted Answer

A) True 
 B)False

Question 20

Evaluate the following statement. "The real rate of return on certain private investments far exceeds the return that can be earned on Social Security. People would be better off if government would allow them to take the money they would have paid into Social Security and invest it in the private sector."

Accepted Answer

The student should recognize that this s

It is generally thought that the earnings penalty will:

An effect that induces workers to substitute Social Security wealth for other types of wealth that could be financed by saving is:

Which of the following statements concerning Social Security is correct?

According to the wealth substitution effect, Social Security allows parents to leave their children a bigger bequest, thereby reducing the children's incentive to save.

According to Martin Feldstein, Social Security has not had a significant impact on household savings.

The sum of 35 years of indexed earnings divided by 420 determines:

Estimates indicate that more than 45 percent of the elderly would have incomes below the federal poverty line in the absence of Social Security.

Which of the following is characteristic of Social Security?

The income effect of a wage decrease says that when wages fall, workers must work more hours in order to make up for their wage reduction.

"The prospect of Social Security benefits has induced workers to retire at earlier ages." Is this statement true or False? Defend your answer.

Sara earned $10,000 at age 40. Assume that the average national wage when Sara was age 60 is $39,800, and is $15,000 when she was age 40. The indexed value of earnings is:

Projections show the OASI Trust Fund being exhausted by the year 2050.

Studies clearly indicate that Social Security has had a significant adverse effect on savings.

The ratio of primary insurance amount (PIA) to average indexed monthly earnings (AIME) decreases as income increases.

Which of the following statements is False?

Most private retirement plans are indexed for inflation and receive preferential tax treatment in the federal tax codes.

Social Security benefits are:

Use the following diagram to answer the following questions. -Refer to Payroll. Suppose there is no payroll tax in effect, which demand curve represents the value of the output produced by labor?

Because Social Security is a risky investment, its real rate of return is below the real rate of return of private investments.

Economic Growth: an Introduction to Scarcity and Choice

An Introduction to Economic Systems and the Workings of the Price System

Competitive Markets and Government Policy: Agriculture

Efficiency in Resource Allocation: How Much Do We Have How Much Do We Want

Market Power: Does It Help or Hurt the Economy

Air Pollution: Balancing Benefits and Costs

Health Care: How Much for Whom

Crime and Drugs: a Modern Dilemma

College Education: Is It Worth the Cost

Educational Reform: the Role of Incentives and Choice

Poverty: Old and New Approaches to a Persistent Problem

Tracking and Explaining the Macroeconomy

Unemployment: the Legacy of Recession, Technological Change, and Free Choice

Inflation: a Monetary Phenomenon

Sustained Budget Deficits: Is This Any Way to Run a Government

International Trade: Beneficial, but Controversial

Financing Trade and the Trade Deficit

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Exam 16: Social Security: Leading Issues and Approaches to Reform

It is generally thought that the earnings penalty will:

An effect that induces workers to substitute Social Security wealth for other types of wealth that could be financed by saving is:

Which of the following statements concerning Social Security is correct?

According to the wealth substitution effect, Social Security allows parents to leave their children a bigger bequest, thereby reducing the children's incentive to save.

According to Martin Feldstein, Social Security has not had a significant impact on household savings.

The sum of 35 years of indexed earnings divided by 420 determines:

Estimates indicate that more than 45 percent of the elderly would have incomes below the federal poverty line in the absence of Social Security.

Which of the following is characteristic of Social Security?

The income effect of a wage decrease says that when wages fall, workers must work more hours in order to make up for their wage reduction.

"The prospect of Social Security benefits has induced workers to retire at earlier ages." Is this statement true or False? Defend your answer.

Sara earned $10,000 at age 40. Assume that the average national wage when Sara was age 60 is $39,800, and is $15,000 when she was age 40. The indexed value of earnings is:

Projections show the OASI Trust Fund being exhausted by the year 2050.

Studies clearly indicate that Social Security has had a significant adverse effect on savings.

The ratio of primary insurance amount (PIA) to average indexed monthly earnings (AIME) decreases as income increases.

Which of the following statements is False?

Most private retirement plans are indexed for inflation and receive preferential tax treatment in the federal tax codes.

Social Security benefits are:

Use the following diagram to answer the following questions. -Refer to Payroll. Suppose there is no payroll tax in effect, which demand curve represents the value of the output produced by labor?

Because Social Security is a risky investment, its real rate of return is below the real rate of return of private investments.

Economic Growth: an Introduction to Scarcity and Choice

An Introduction to Economic Systems and the Workings of the Price System

Competitive Markets and Government Policy: Agriculture

Efficiency in Resource Allocation: How Much Do We Have How Much Do We Want

Market Power: Does It Help or Hurt the Economy

Air Pollution: Balancing Benefits and Costs

Health Care: How Much for Whom

Crime and Drugs: a Modern Dilemma

College Education: Is It Worth the Cost

Educational Reform: the Role of Incentives and Choice

Poverty: Old and New Approaches to a Persistent Problem

Tracking and Explaining the Macroeconomy

Unemployment: the Legacy of Recession, Technological Change, and Free Choice

Inflation: a Monetary Phenomenon

Sustained Budget Deficits: Is This Any Way to Run a Government

International Trade: Beneficial, but Controversial

Financing Trade and the Trade Deficit

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