Deck 8: Finances and Economics

Question 1

The Social Security Act was passed in August 1935. Which of the following was not a result of this act?

A) the protection of workers from unemployment and poverty in retirement
B) the creation of jobs for the younger generation
C) the movement of older workers out of the labor force
D) the protection of self-employed, casual, and domestic workers

Answer 1

D

Question 2

Today, the Social Security program covers more than __% of the labor force in the United States.

A) 30
B) 50
C) 70
D) 90

Answer 2

D

Question 3

The retirement income system in the United States consists of

A) government pension programs and private savings.
B) government pension programs and employment pensions.
C) private savings and employment pensions.
D) government pension programs, employment pensions, and private savings.

Answer 3

D

Question 4

Retirement income sources form a pyramid with ________ making up the broad base.

A) personal assets
B) employer pensions
C) government programs
D) disability insurance

Question 5

__% of people aged 65 and older receive Social Security benefits.

A) 90
B) 75
C) 50
D) 25

Question 6

In 2014, Social Security made up __% of the income of all older people.

A) 93
B) 64
C) 34
D) 32

Question 7

Social Security is structured so that seniors get paid today from payments made by current workers. Economists call this a

A) take-it-or-leave-it plan.
B) pay-as-you-go plan.
C) all-or-nothing plan.
D) supplemental-security-income plan.

Question 8

Twenty percent of older people who received Social Security benefits said these benefits account for

A) one third of their total income.
B) more than half of their total income.
C) more than 80 percent of their total income.
D) their total source of income.

Question 9

According to Diamond and Orszag (2007), the Social Security fund will face a shortfall in the future due to

A) increasing life expectancy, increasing inequality of earnings, and the legacy of debt burden.
B) decreasing life expectancy, decreasing inequality of earnings, and the legacy of debt burden.
C) increasing life expectancy and bad management.
D) poor management.

Question 10

A worker who has paid into the system is eligible for Social Security benefits when the worker

A) turns 65 and has contributed for 10 years.
B) has paid at least 52 quarters of earnings.
C) has put in 35 years.
D) turns 50, but at that age the retiree gets a reduced benefit.

Question 11

An increase in the number of older people and longer life expectancies will lead to more retirees in the future. To cope with this increase, the government has

A) committed itself to finding alternative revenue to finance Social Security.
B) decided to reduce benefits and programs until the year 2027.
C) raised the age of retirement to keep people at work longer.
D) made the minimum requirements for Social Security more restrictive.

Question 12

________ account for the sharp decrease in poverty rates for older people since the 1950s.

A) Private pensions
B) Social Security programs
C) Government pensions
D) Earning

Question 13

The Social Security system needs reform, such as raising revenues, reducing benefits, and investing funds to

A) offer guaranteed payments to individuals.
B) meet its obligations.
C) redistribute revenues to low-income beneficiaries.
D) offer disability insurance.

Question 14

The Supplementary Security Income program

A) guarantees an income at 75%-90% of the poverty level.
B) helps widows receive up to 100% of their husband's pension.
C) provides 50%-80% of the worker's pre-retirement income.
D) helps the poorest 10% of the older population.

Question 15

Absolute deprivation refers to

A) people's feelings of poverty.
B) the minimal income needed to survive.
C) high wage earners.
D) older people without informal supports.

Question 16

Congress approved the Supplemental Security Income program in 1972 to

A) provide a safety net for workers.
B) privatize Social Security.
C) help older people whose incomes fall below the poverty line.
D) replace Social Security.

Question 17

In 2014, __% of older people received SSI payments.

A) 25
B) 57
C) 75
D) 96

Question 18

The average wage earner will see income replacement of about 39% from Social Security. Therefore, middle-class workers will need to

A) get accustomed to a lower standard of living.
B) take courses on effective money management in order to stretch the reduced money further.
C) rely on private pensions to help middle- and upper-income earners maintain their lifestyle.
D) work part time to earn extra money.

Question 19

________ is responsible for the regulation and supervision of private pension plans.

A) ERISA
B) IRA
C) SSI
D) AARP

Question 20

About __% of all workers in 2014 belonged to a private pension plan.

A) 25
B) 54
C) 75
D) 90

Question 21

Why have some companies pivoted toward the use of defined benefit and defined contribution pension plans?

A) They provide better benefits to workers.
B) They provide more flexibility for workers who change jobs frequently.
C) They are cheaper and easier to manage and report on than other kinds of pension plans.
D) The government provides better tax incentives when DB plans are offered.

Question 22

Private pensions and Social Security together provide __% of workers' pre-retirement income.

A) 50
B) between 50 and 80
C) 75
D) between 75 and 100

Question 23

When offering pension plans, many companies now opt for a defined contribution plan rather than defined benefit plans. Defined contribution plans

A) promise a set amount to workers when they retire based on final salary and number of years of service.
B) promise a set amount to workers when they retire based on average salary and number of years of service.
C) say how much workers have to pay into the plan, and guarantee a set return.
D) say how much workers have to pay into the plan, but do not guarantee a set return.

Question 24

A ________ plan relieves companies of long-term pension obligations and makes the worker responsible for the plan's performance.

A) 401(k)
B) defined benefit plan
C) Social Security
D) government pension

Question 25

Individual Retirement Accounts (IRAs) provide future retirees

A) with a tax-deductible and tax-free savings for retirement.
B) a 25% replacement on their pre-retirement income.
C) the opportunity to save for retirement if they don't have a pension plan.
D) full pension benefits even if they move to another company.

Question 26

What effect does inflation have on the value of private employer-sponsored pension plans have on the value of plans over time?

A) Most employer-sponsored plans are automatically adjusted for inflation, so there is no effect on pension value.
B) Pension value slowly erodes over time, leading to a long-term decrease in value by very old age.
C) The federal government will make up the difference in pension value, so there is no effect.
D) Inflation will cause private pension values to increase over time.

Question 27

________ make up the third largest source of income for older people.

A) IRAs
B) Social Security benefits
C) Financial assets and earnings from work
D) Employment pensions

Question 28

__% of older people claimed some asset income in 2007.

A) 15
B) 23
C) 51
D) 86

Question 29

Which of the following is NOT an example of asset income?

A) savings and checking accounts
B) financial investments (stocks and bonds)
C) bank deposits
D) government transfers

Question 30

Older people's incomes improved ________ the income of other adults during the slow growth period of the late 1970s and early 1980s.

A) more than
B) less than
C) about the same as
D) inversely proportional to

Question 31

Which of the following does not describe a factor contributing to the financial improvements felt by older people in the 1960s and 1970s?

A) Congress added a cost of living increase to Social Security between 1968 and 1971.
B) The government added a 20% increase to Social Security benefits in 1972.
C) The federal government made SSI payments to over 2 million older people in 1971, bringing up the average yearly income for seniors.
D) New retirees had paid into Social Security and pension plans longer than retirees in the past, thus allowing these retirees better benefits.

Question 32

The U.S. Census Bureau (2015) found that

A) older people had a poverty rate lower than all other age groups.
B) older people in the United States had the lowest cash income in relation to other age groups.
C) the United States had the lowest proportion of poor older people compared to other industrialized countries.
D) pockets of poverty exist within the older population.

Question 33

A study of older people's incomes shows that

A) rich and poor older people begin in different financial situations, but over time, these groups grow to become indistinguishable.
B) retirement almost always leads to long-term decline in income and a consequent decline in living standards.
C) the economic condition of older people remains similar across age, gender, marital status, living arrangement, and race.
D) rich people gained the most through Social Security.

Question 34

An Aon Hewitt study (2012) reports that, in retirement, a retiree would need __% of his or her pre-retirement income to maintain their standard of living.

A) 35
B) 55
C) 85
D) 95

Question 35

The economic conditions of older people differ by

A) gender.
B) race.
C) marital status.
D) age, gender, race, and marital status.

Question 36

Which of the following statements is true?

A) Poverty rates decline with age.
B) Age is not a factor in a senior's income level.
C) The "hidden poor" is a myth.
D) The older the person, the greater the chance of a low income.

Question 37

Figures show that poverty rates increase with

A) age.
B) gender.
C) minority status.
D) mental status.

Question 38

The young-old and the old-old spend their money in different ways. Which of the following best describes their difference?

A) The young-old save money in anticipation of later expenses such as health care, while the old-old spend their money on health care.
B) The young-old spend money on debt accumulated during youth, while the old-old, who are free from this burden, spend money on entertainment.
C) The young-old spend money on travel and restaurant food, while the old-old spend money on health care.
D) The young-old spend money on material items, while the old-old spend money on exploring new experiences.

Question 39

Older women have lower incomes than older men. This income gap based on gender among older people is explained by

A) the greater number of women who survive into old age.
B) the fact that women often report different sources of income than men.
C) calculation errors in Social Security income formulae.
D) past inequities between men and women and their different work histories.

Question 40

The Pension Rights Center (2014) reports that older women in 2014 had a median income of __% of older men.

A) 92
B) 56
C) 41
D) 12

Question 41

The income gap between older men and women may diminish in the future, but it will probably still exist. Which of the following is NOT an accepted condition that explains lower retirement incomes for women in the future?

A) Women make less use of Individual Retirement Accounts (IRAs), meaning they often lose control over this part of their retirement income.
B) Women work in society's lowest paying jobs, therefore they contribute and receive less money from Social Security.
C) Women often have shorter work careers because they care for a family. This reduces the number of years of contribution toward Social Security.
D) Women tend to work in part-time jobs and in small businesses. These jobs rarely provide pension plans.

Question 42

A study by Rayman, Allshouse, and Allen (1993) found that the income gap between older men and women is due to

A) differences in levels of education.
B) time out of the workforce.
C) sex discrimination at work.
D) the human capital theory.

Question 43

The U.S. Department of Labor (2010) reports that, compared to a man in the labor force, a woman in the labor force on average earned __% of his salary.

A) 50
B) 75
C) 80
D) 95

Question 44

The U.S. Department of Labor (2010) reports that women aged 16 to 24 get pay equivalent to __% of young men. If this pattern continues, younger cohorts of women will have ________ incomes in old age.

A) 95; better
B) 43; better
C) 94; worse
D) 93; worse

Question 45

Older married people have ________ income rates compared to nonmarried older people.

A) worse
B) better
C) the same
D) exponentially greater

Question 46

Couples have higher incomes than unmarried people for three reasons. Which of the following is NOT a reason?

A) Some couples benefit from having two incomes for all or part of their careers.
B) Couples can get the highest wage earner's Social Security benefits.
C) Widows often experience a decrease in income after a spouse's death.
D) Unmarried people have lower paying jobs than married people.

Question 47

Minority older people have ________ income rates than whites.

A) lower
B) better
C) the same
D) exponentially lower

Question 48

African American and Hispanic American older women had a poverty rate more than ________ times the rate of white women.

A) 2
B) 3
C) 4
D) 5

Question 49

What is the key to reducing the disproportionate poverty levels among minorities and providing them in old age with a more secure income base and higher pension entitlement?

A) paying minorities more money per hour; this would allow the minorities to pay more money into the Social Security program
B) putting aside a special Social Security fund for minorities to supplement regular Social Security payments
C) affirmative action ensuring equal opportunity for education, jobs, and promotions throughout their lives
D) pension reform that focuses on the needs of poor older people

Question 50

An end to poverty in old age would include all but the following:

A) increases in SSI and Social Security
B) more affordable prescription medicine
C) better health insurance
D) more affordable housing

Question 51

Pension reform can at best make up for some of the inequities minorities suffer. Therefore, the need for pension reform points to the need for

A) legislation reform.
B) more enlightened hiring practices.
C) more public education.
D) societal reform.

Question 52

Social Security policies assume that in the average family the husband works in the labor force and the wife stays at home. Schulz (2001) says that this reflects a(n)

A) best-guess model for viewing the structure of work and family life today.
B) pattern that is no longer typical in the U.S.
C) accurate picture of the current work and family structure.
D) chauvinistic and ignorant viewpoint that harms millions of older people.

Question 53

Currently, Social Security policies penalize women who take more time out of the workforce to care for children. Which of the following is a suggested reform to Social Security?

A) Provide homemakers with homemaker credits based on an estimated income for their household work.
B) Set a standard increase in Social Security benefits for older women who took time out from their careers to care for a family.
C) Allow husbands to pay into their wives' pension plan for the duration of any dropout period.
D) Increase the dropout allowance from five years to an indefinite period, so long as the homemaker cares for a child under ten.

Question 54

Reforms in homemaker credits, spousal pensions, widow's benefits, and income limits would bring ________ policies in line with a woman's life course today.

A) Social Security
B) SSI
C) employment pensions
D) IRAs

Question 55

Which of the following is not a critique of the Supplemental Security Income (SSI) program?

A) It pays benefits below the poverty line.
B) The program enrolls only about half the people eligible.
C) State supplements vary widely.
D) It fails to solve larger social issues such of racial and gender discrimination.

Question 56

Vesting, portability, and better insurance are all reforms suggested for

A) SSI.
B) Social Security.
C) private pensions.
D) IRAs.

Question 57

The current five-year employment requirement for full vesting of pension plans often hurts workers who change jobs, lose their jobs, or who take time out for family care. The government could reform this part of pension plans by

A) eliminating vesting periods.
B) legislating a shorter vesting period.
C) legislating a longer vesting period.
D) legislating a mandatory 75% of the full private pension if the worker leaves because of job loss or family care before the end of the five-year period.

Question 58

The federal government set up the Pension Benefit Guaranty Corporation (PBGC) to insure private defined benefit pension plans. Critics are calling for a review of the PBGC because

A) it doesn't want legislation that demands employers have the funds in place to meet worker's future pensions.
B) it pays more than the worker's company on failed pension policies, thus creating a budget deficit every year.
C) it has too large a deficit to cover underfunded pension plans if they fail.
D) the government only predicted to cover 15-18 million retirees, and it now covers 40 million people.

Question 59

The U.S. retirement income system provides a ________ standard of living for most older people and keeps the poorest older people ________.

A) decent; out of poverty
B) poor; in poverty
C) lavish; in the work force
D) poor; from retiring

Question 60

The large size of the Baby Boom generation, a smaller number of future workers, and an increase in life expectancy will

A) improve the Social Security system.
B) strain and cause a shortfall in Social Security payments.
C) force the system to go broke.
D) help the Social Security system ensure a better old age for everyone.

Question 61

The Social Security Administration concludes that Social Security is not sustainable over the long term without

A) large infusions of additional revenue.
B) legislation reform.
C) increasing income tax rates.
D) implementing changes in the future.

Question 62

Gerontologists have proposed reforms for each part of the retirement income system. Which of the following is not included in these reforms?

A) increased payments into the Social Security system
B) portability and vesting for private pensions
C) prevention of misuses of pension funds
D) reduced coverage for older workers