Which of the Following Best Describes How the Social Security

question 40

Multiple Choice

Which of the following best describes how the Social Security system is funded?

• A) Fees paid to the Federal Deposit Insurance Corporation (FDIC)
• B) A pay-as-you-go system where those currently working support those who are retired
• C) Funded solely by employees' contributions through wages
• D) Funded by a progressive tax on income
• E) Essentially, a private pension fund in which employees decide how much to contribute

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Definitions:

Fair Value

The financial figure anticipated when disposing of an asset or the price to move a liability in a regulated exchange involving market entities on the date of valuation.

Gain On Bargain Purchase

Occurs when a company acquires another company for a price less than the fair market value of its net assets, resulting in a gain on the acquisition balance sheet.

Income Tax Expense

The accounting expense associated with the income taxes a company is obligated to pay to governmental authorities based on its taxable income.

Tax Rate

A percentage at which an individual or corporation is taxed; the tax authority sets it, and it can vary based on income, property value, sales price, etc.