Our Ability to Manage Social Security as a "Pay-As-You-Go" Program

question 66

Multiple Choice

Our ability to manage Social Security as a "pay-as-you-go" program (in which taxes collected from those currently working are used to make benefits payments to those currently retired) is impaired when the number of retirees per worker increases. The current concern about the stability of Social Security is based primarily on projections that there will many more retirees per worker when the baby boomers begin to retire. Then, if we want to maintain a pay-as-you-go system, we can:

• A) reduce benefits to compensate for the increase in the number of retirees per worker.
• B) raise benefits to compensate for the increase in the number of retirees per worker.
• C) maintain current benefit levels with no changes to how Social Security is financed.
• D) reduce benefits to compensate for the decrease in the number of retirees per worker.

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Definitions:

Emerging Market

A country's market that has some characteristics of a developed market but does not fully meet its standards, showing potential for economic growth.

Window of Opportunity

A limited period during which an advantageous action can be taken or a goal can be achieved before the conditions change.

Barriers to Entry

Obstacles that make it difficult for new entrants to enter a market, including high start-up costs, legal restrictions, and existing competition.

EBIAT

Earnings Before Interest After Taxes, a financial metric that measures a company's profitability excluding interest expenses but after taxes.