Why Do People on Fixed Pensions Get Poorer Every Year

question 2

Multiple Choice

Why do people on fixed pensions get poorer every year?

• A) because payments remain stable, but inflation reduces their real value
• B) because payments are fixed on life expectancy, and the longer the retiree lives, the less the pension pays out
• C) because payments depend on the number of wage earners paying in, which is decreasing, and the number drawing pensions, which is increasing, as society ages
• D) because payments do not fluctuate with OAS payments

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Definitions:

Comparative Advantage

The ability to produce a good at a lower opportunity cost than another producer

Sectoral Shocks

Unexpected events that cause significant shifts in demand or supply in a specific sector of the economy, leading to changes in prices and output levels.

Frictional Unemployment

Unemployment due to the time workers spend in job search, usually short-term and occurring when individuals are transitioning between jobs.

Natural Rate

Often referred to as the natural rate of unemployment, it is the level of unemployment consistent with a stable rate of inflation, where the labor market is in equilibrium.