Question 11

Social security can be justified on the grounds of:

		adverse selection.
		income distribution.
		paternalism.
		all of the above.

5 points

Question 12

A fully funded plan requires:

		you to pay for your dinner as you go to the table to eat.
		current working citizens to pay for current retired citizens.
		no taxes since current workers pay for current retirees.
		retirees to be paid from accounts that have accumulated with interest over their working lives.

1 points

Question 13

The pay-as-you-go nature of the Social Security system means that:

		current beneficiaries are paid out of general tax revenues.
		current beneficiaries are paid out of the payroll taxes levied on current workers.
		current beneficiaries are paid based on contributions made during their last five working years.
		current beneficiaries are paid out of current earnings on the Social Security trust fund.

5 points

Question 14

Which program provides assistance to the aged, blind and disabled?

		Supplemental Security Income program.
		Earned Income Tax Credit.
		Social Security Program.
		TANF

5 points

Question 15

An actuarially fair return means:

		returns on investments are indexed to the stock market.
		returns on investments have to be positive.
		benefits received, on average, would be equal to the premiums paid.
		premiums for insurance are generally paid by the government.

5 points

Question 16

The retirement effect is:

		when people retire earlier than they normally would have due to Social Security.
		when people retire later than they normally would have due to Social Security.
		when people decide not to retire at all because of problems with Social Security.
		when people save less for their retirement due to Social Security.

5 points

Question 17

A current worker may save more towards retirement so that he or she will have more to leave his or her children later. This altruistic motive is known as the:

		altruism effect.
		bequest effect.
		income effect.
		savings effect.

5 points

Question 18

The saving behavior of social security program can be explained by:

		rational-expectations theory.
		intertemporal-substitution.
		life-cycle model.
		tax smoothing.

5 points

Question 19

All of the following changes can help to maintain the current system of social security except:

		raise the payroll tax.
		raise the retirement age.
		change the benefit formula.
		privatize the system.

5 points

Question 20

The poverty line is:

		average income of the bottom one-tenth of all income recipients.
		cost of an economical and nutritional food plan for a family multiplied by five.
		a fixed level of real income considered enough to provide a minimum standard of living.
		average income of a family headed by a worker who has been unemployed for six months or more.