Recent Proposals to Allow the Social Security Trust Fund to Invest

question 9

Multiple Choice

Recent proposals to allow the Social Security trust fund to invest in the stock market (instead of buying government bonds) are based on the premise that

• A)the returns to stocks are higher than the returns to bonds.
• B)the returns to stocks aren't as risky as the returns to bonds.
• C)the transactions costs for investing in stocks are lower than the transactions costs for investing in bonds.
• D)stocks are more liquid than bonds.

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Definitions:

Heuristics

Mental shortcuts, or rules of thumb, that are used for making judgments and decisions.

Sleeper Effect

A delayed increase in the effect of a message that follows a period of discounting or ignoring the message.

Primacy Effect

The phenomenon that the first items presented in a series are more likely to be remembered than items in the middle.

Moderate Alcohol Consumption

The intake of alcoholic beverages within limits considered to have minimal health risk, often defined differently across cultures and guidelines.