In this question, we consider a problem which arises when we switch our pension system from...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
In this question, we consider a problem which arises when we switch our pension system from PAYG to FF. Suppose that a PAYG pension system is in effect until t-1 and the government switches to the FF system at the beginning of period t. This reform is not anticipated. To avoid inter-generational inequality, the government subsidizes the old in t, which is financed by issuing government bonds, and imposes lump-sum tax, 7, on the young in all subsequent generations. For simplicity, we ignore capital accumulation: k is constant over time, so are w and r. And assume n < r. (a) How much of total subsidies are required to keep the same life-time budget for generation t 1 before and after the reform? (b) The government continues to impose a constant lump-sum tax, 7, on the young forever to finance the subsidies for generation t - 1. Derive T. (c) Do you think this pension reform improves welfare? In this question, we consider a problem which arises when we switch our pension system from PAYG to FF. Suppose that a PAYG pension system is in effect until t-1 and the government switches to the FF system at the beginning of period t. This reform is not anticipated. To avoid inter-generational inequality, the government subsidizes the old in t, which is financed by issuing government bonds, and imposes lump-sum tax, 7, on the young in all subsequent generations. For simplicity, we ignore capital accumulation: k is constant over time, so are w and r. And assume n < r. (a) How much of total subsidies are required to keep the same life-time budget for generation t 1 before and after the reform? (b) The government continues to impose a constant lump-sum tax, 7, on the young forever to finance the subsidies for generation t - 1. Derive T. (c) Do you think this pension reform improves welfare?
Expert Answer:
Answer rating: 100% (QA)
a Subsidies required to keep the same lifetime budget for generation t1 before and after reform In order to keep the same lifetime budget for generati... View the full answer
Related Book For
Computer Networking A Top-Down Approach
ISBN: 978-0136079675
5th edition
Authors: James F. Kurose, Keith W. Ross
Posted Date:
Students also viewed these mathematics questions
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
After ACC management decided to raise the $10.5 million by selling bonds (Problem ST 15.4), the company's engineers estimated the operating costs of the cogeneration project. The annual cash flow is...
-
In this question we consider derivation of the C, statistic for model selection discussed in lectures. Consider fitting the proposed general linear model and write ; for the fitted value at r; and...
-
Consider a two-stage compression refrigeration system operating between the pressure limits of 0.8 and 0.14 MPa. The working fluid is refrigerant-134a. The refrigerant leaves the condenser as a...
-
The accounting records of Michigan Fur Traders include these accounts: Requirement 1. Compute Michigans net cash provided by (used for) operating activities during December. Use the indirect method....
-
Company A is a global company based in the United States that operates in the financial industry. Company A serves its customers with financial products, such as checking accounts, bank cards, and...
-
Presented below are summary financial data from the Bristol-Myers Squibb 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following liquidity and solvency ratios: cash...
-
Grenfell Company is preparing a cash budge for 2010 for purchases of Calvos. Budgeted data are as follows: Cost of goods sold for the year 2010 ......... $600,000 Accounts payable, 1/1/10...
-
For some problems, if possible, sketch a little diagram to clearly see the area under the normal curve. 7. Find the z value to the right of the mean so that a. 64.74% of the area under the normal...
-
Determine the objectives of the test. You are auditing both quantities and pricing of the final inventory accumulation. a. Explain the assertions that you are testing. b. Explain the evidence that...
-
Chinese ridesharing company DiDi Chuxing was formed from the 2015 merger of rival firms DiDi Dache and Kuaidi Dache. Its vision is to become a global leader in transport and transport technology,...
-
6. A jellyfish is floating in a water-filled aquarium 1.00 m behind a flat plane of glass 6.00 cm thick and having an index of refraction of 1.50. a. Where is the image of the jellyfish located? b....
-
Parex Ltd., a listed Canadian company that follows IFRS, acquired 90% of outstanding shares of sheet information and other information are as below: balance Cash and receivables Parex Carrying value...
-
Compute each of the following integrals. (a) (4x+3)dx 8t+2 (b) f =dt 2t2+t (c) fecos(t) sin(t)dt (d) fu(u3+5) du (e) fx 1xdx - (f) sin(2x + x) + x sin(2x + x)dx (g) fo x+1dx
-
Given the picture to the right: a) What is the force exerted by the women in each hand in this push-up position? b) If at the top of her push up position her centre of mass is 0.240 m off the ground,...
-
Jill Company owns an equity investment in Jack Company and it is being properly reported using the equity method. Here is the relevant data from the first year of ownership: % of Jack's stock owned...
-
The mass of a 55-inch LED HDTV is 15.7 kg. What is the weight in SI units of this television? 
-
In the current year, the City of Omaha donates land worth $500,000 to Ace Corporation to induce it to locate in Omaha and create an estimated 2,000 jobs for its citizens. a. How much income, if any,...
-
In Section 3.5.4, we discussed the doubling of the timeout interval after a timeout event. This mechanism is a form of congestion control. Why does TCP need a window-based congestion-control...
-
What is the man-in-the-middle attack? Can this attack occur when symmetric keys are used?
-
Consider distributing a file of F bits to N peers using a client-server architecture. Assume a fluid model where the server can simultaneously transmit to multiple peers, transmitting to each peer at...
-
Which of the following characteristics do monopolistic competition and perfect competition have in common? a. Individual firms believe that they can influence market price. b. Firms sell brand-name...
-
Firms in monopolistically competitive industries cannot earn economic profits in the long run because a. government regulators, whose first interest is the public good, will impose regulations that...
-
What is excess capacity?
Study smarter with the SolutionInn App