Explain the difference between fully funded social security system and pay-as-you-go social security system
What will be an ideal response?
Fully funded social security system taxes workers, invests their contributions in financial assets, and pays back the principal plus the interest to the workers when they retire. Pay-as-you-go system taxes workers and redistributes the tax contribution as benefits to the current retirees. There are two major differences between the two systems. First, what retirees receive is different in each case. Second, the two systems have different macroeconomic implications. In both systems private saving goes down. But in the fully funded system, public saving goes up and it has no effect on total saving and no effect on capital accumulation. In the pay-as-you-go system, the decrease in private saving is not compensated by an increase in public saving. Total saving goes down, and so does capital accumulation.
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Suppose the market clearing price for apples falls from $3.00 to $2.00 per pound, and the overall market clearing output increases from 1 million to 2 million pounds. How can we explain the fall in price and increase in market output?
A) Supply decreased and demand remained unchanged. B) Supply remained unchanged and demand decreased. C) Demand increased and supply remained unchanged. D) Demand remained unchanged and supply increased.
The cost to a physician of tending a patient is
A) dependent on the number of years over which the physician practices. B) higher for a recent medical-school graduate than for a physician with a well-established practice. C) the value of the time when spent in its next best use. D) zero under a system of complete and comprehensive medical insurance.
The best measure of a country's standard of living is
A) total nominal GDP. B) GDP per unit of capital. C) GDP per capita. D) GDP per labor hour.
Discuss the following views concerning the impact of monetary policy:
a. classicals b. Keynesians c. monetarists d. "modern view"