One Adverse Effect of the Pay-As-You-Go System of Funding Social

question 48

Multiple Choice

One adverse effect of the pay-as-you-go system of funding Social Security is that:

• A)it builds up a surplus of savings,which increases interest rates.
• B)it reduces private capital formation,thus reducing future incomes.
• C)it reduces the wealth of the elderly who spend most of their income on consumption rather than on investment goods.
• D)it creates an income disparity between the working age population and the elderly.

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Definitions:

Nordic

Pertaining to the countries of Northern Europe, including Denmark, Finland, Iceland, Norway, and Sweden.

Baltic

The term Baltic often refers to the Baltic Exchange, a marketplace for the trading and settlement of physical and derivative shipping contracts.

Securities Act

A U.S. law enacted in 1933 that governs the sale of securities, aiming to provide investors with transparent information and to prevent fraud.

New Securities

Financial instruments that have been newly issued to investors, usually referring to stocks or bonds that have just been offered to the public or private investors.