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1.Health care costs have increased due to

A)an aging population

B)health care has high income elasticity of demand

C)health sector is labor intensive

D)improvements in the quality of health care are relatively costly

E)all of the above.

F)none of the above.

2. The negative impacts of individual screening can (at least partly) be overcome by

A)mandatory and universal insurance

B)employer-provided coverage

C) community rating

D)all of the above.

E)none of the above.

3.Social security (pension insurance) provides

A)insurance against living shorter than expected.

B)a way to smooth consumption.

C)all of the above.

D)none of the above.

4.From 1983 to 2007, the trend of U.S. Social Security expenditures has been

A)decreasing in real U.S. dollar terms.

B)decreasing in nominal U.S. dollar terms.

C)decreasing as a percent of GDP.

D)all of the above.

E)none of the above.

5.Despite some disagreement, key reasons for the government's involvement in social security (pension insurance) is or has been

A)to improve the economic status of the elderly.

B)that a private "annuity" insurance may due to adverse selection lead to a "death spiral".

C)due to moral hazard (people hope the government will bail them out).

D)all of the above.

E)none of the above.

6. With regards to health insurance, the "time inconsistency" problem refers to

A) public financing problems that arise due increasing health care costs and a government that had promised universal health coverage.

B) the problem that people decline insurance as they know that the government or relatives will "bail them out" if they really get sick.

C) the case where people cannot afford health insurance premiums as long as they are young.

D) the case where health insurance companies promise to cover certain illnesses but then decline payment when many people are affected by the illness.

7. Modern research treats education as _________ that has both costs and returns.

The returns are principally the increase in_________due to greater amounts of schooling. The costs include tuition, fees, and other direct expenses from schooling, and the_________ being in school rather than at work.

A) a benefit; earnings; costs of

B) a public sector program; expenditures; benefits of

C) an investment; earnings; earnings forgone by

D) an investment; costs; earnings forgone by

Note: Just to make sure you understand what to do here: the first terms goes into the first gap, the second terms goes into the second gap, and the third terms goes into the third gap.

8. The two main social security systems are

A)(1) the system based on current tax contributions and (2) the pay-as-you-go system.

B)(1) the pay-as-you-go system and (2) the fully funded system.

C)(1) the fully funded and (2) the accumulated fund system.

D) (1) the pay-as-you-go system and (2) the pay-as-you-work system.

9. Similar to most social security systems, the benefits of the U.S. social security system are based on earning history (i.e., the average of the highest 35 years of earnings), and

A) the earnings are like the benefits indexed for inflation.

B) the earnings are indexed for inflation, while the benefits are not indexed for inflation.

C) the earnings are not indexed for inflation, but the benefits are indexed for inflation.

D) neither the earnings nor the benefits are indexed for inflation.

10. The so-called "retirement effect" of social security typically

A) decreases savings.

B) keeps savings constant.

C) increases savings.

D) none of the above.