Econ 101 Ch 40 Homework

In 2019, a worker who earned $150,000 would have ________ in Social Security taxes taken out of his or her pay and ________ would also be paid by the employer.

$10,414.80; $10,414.80 (both equal to $132,900 × .0765 + $17,100 × .0145)

If in 2019, a woman made $100,000 on the job, $40,000 from a consulting business she operated, and $10,000 in dividends on stock she owned, she would owe old-age Social Security taxes on

$132,900.

Employers and employees each pay a rate for Social Security that has risen from ________ to ________.

1%; 7.65%

Social Security was enacted in the

1930's.

Current projections predict the number of U.S. workers per retiree in 2030 to be

2.2.

Most economists accept the need for a required pension system because

people will save less than is optimal knowing that they can rely on welfare, and people may not have the information necessary to calculate their correct level of savings.

Indexing Social Security benefits for prices rather than wages would

reduce benefits slowly (by about 1% per year) over time.

The solvency of Social Security can be extended if

the cap on taxable earnings is raised.

The solvency of Social Security can be extended if

the retirement age is increased.

The solvency of Social Security can be extended if

the tax rate is increased.

The solvency of Social Security can be extended if

the trust fund invests in private corporate securities.

The demographic bulge that is at the heart of Social Security's long-term problems is attributable to a baby boom that occurred

after World War II.

In 1982, the retirement age was raised in such a manner that it is 65 for everyone born before 1938

and 67 for everyone born in 1960 or after, with a gradual increase in between.

If you overhear a group of people talking about their plans to save for their retirement and one of them says that it causes them to save less because, as they reason it, "the government is saving for me", you would attribute this to the

asset substitution effect.

Consider a comparison of the benefit and tax structure of Social Security to what might be achieved in a private investment alternative. Which of the following statements are true?

T. Social Security is funded with a payroll tax. T. Social Security is a hybrid of a pay-as-you-go and fully funded system. F. Under a private investment option, the guaranteed Social Security benefit would not be reduced. F. Under a private investment option, the proceeds of the accounts would exceed any expected Social Security benefit. T. Under a private investment option, the guaranteed Social Security benefit would be reduced. T. Social Security benefits are adjusted each year for wage inflation. F. Employers pay all of the Social Security payroll tax.

One argument offered by economists for having a Social Security system is that if there were no Social Security, workers might

decide to use welfare as a retirement income, pushing the costs off onto others.

Because of Social Security, people are retiring

earlier than ever.

A pay-as-you-go system

has current retirees being paid out of the taxes of current workers.

If you save more because Social Security allows you to retire earlier than you would have retired had Social Security neither taxed you nor provided you with benefits, then this is referred to by economists as the

induced retirement effect.

Under Social Security, the surplus (the excess of tax receipts over benefit payments)

is invested in the form of US Treasury Notes (i.e. government debt).