Both Social Security and Medicare Are Pay-As-You-Go Programs

question 347

Multiple Choice

Both Social Security and Medicare are pay-as-you-go programs. This means that

• A) current taxpayers fund the benefits that are currently paid out.
• B) future beneficiaries contribute to a pool of funds today that will be used to pay for their benefits in the future.
• C) the government sets money aside funds for the benefits, which will be tapped as needed.
• D) beneficiaries pay for the programs as they enter into them.

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Definitions:

Fair Market Price

The price of a good or service that is agreed upon by both buyer and seller, under no pressure, in an open and competitive market.

Redeemed

The act of exchanging something, such as a bond or coupon, for value, often for cash or goods.

Unamortized Discount

The portion of a bond discount that has not yet been expensed to interest expense over the bond's life.

Carrying Value

The book value of an asset as reflected in a company's financial statements, calculated as the original cost minus accumulated depreciation.