ECO 450 Week 6 Quiz – Strayer
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Social Security and
1. The Social Security pension system is a fully funded retirement plan.
2. Social Security pension benefits are transfers from workers to retirees.
3. Social Security pensions are financed by voluntary contributions by workers.
4. The gross replacement rate measures the ratio of taxes paid per year by workers to their annual Social Security pension when they retire.
5. In the year prior to retirement, a worker earned $20,000 and paid $5,000 in taxes on those earnings. His annual Social Security pension is $10,000 per year. Then it follows that his net replacement rate is 50 percent.
6. The gross replacement rate for Social Security pensions is the same for all workers independent of their preretirement earnings.
7. The annual growth in wages subject to Social Security taxes is 3 percent. Given the payroll tax rate, the growth in funds available to pay pension benefits is also 3 percent.
8. The asset-substitution effect of Social Security pensions discourages saving.
9. The availability of Social Security pensions to workers over normal retirement age results in an income effect unfavorable to work but no substitution effect.
10. The bequest effect of Social Security encourages workers to save less.
11. The normal retirement age for Social Security old-age pensions is 67 for people born in the United States in 1960 or later.
12. Workers in the United States can retire under Social Security at age 62 with lower pensions than they would receive at their normal retirement age.
13. As of 2009, retired workers between the ages of 62 and their normal retirement age were subject to an “earnings test” that reduced their pension by $1 for each $2 of earnings after a certain minimum level of earnings.
14. Reducing the replacement rate will have no effect on the tax rate necessary to finance pensions under a pay-as-you-go, tax-financed pension system.
15. Workers who quit their jobs are eligible for unemployment insurance benefits in the United States.
16. By 2050, the expected percentage of the U.S. population that is considered elderly will be less than 20%.
17. Social Security was created in 1965.
18. On average, the elderly are less likely to be poor when compared to the rest of the U.S. population.
MULTIPLE CHOICE QUESTIONS
1. The Social Security retirement system:
a. is a fully funded pension system.
b. is a tax-financed system that pays benefits from taxes that are invested to return principal and interest to workers when they retire.
c. is a tax-financed retirement system that finances pensions by taxing workers each year and transferring the bulk of revenues obtained directly to retirees.
d. does not use taxes on workers to pay pensions to retirees.
2. The gross replacement rate:
a. measures a worker’s monthly retirement benefit divided by monthly earnings before taxes in the year prior to retirement.
b. measures a worker’s monthly retirement benefit divided by monthly earnings after taxes in the year prior to retirement.
c. is an increasing function of gross monthly earnings prior to retirement.
d. is independent of gross monthly earnings prior to retirement.
3. A worker earns $2,000 per month before taxes. He pays $140 per month payroll tax on those wages. In addition, the income taxes on those wages are $360 per month. On retirement, the worker receives a Social Security pension of $750 per month. Which of the following statements is true?
a. The worker’s gross replacement rate is 50 percent.
b. The worker’s net replacement rate is 50 percent.
c. The worker’s net replacement rate is 38 percent.
d. The worker’s net replacement rate is 75 percent.
4. The growth in hourly wages over the past 50 years has averaged about 2 percent per year. How¬ever, the growth in Social Security pensions has far exceeded this 2-percent rate. The growth in tax revenue to finance Social Security benefits in excess of 2 percent per year can be accounted for by:
a. increases in payroll tax rates.
b. use of other taxes beside the payroll tax to pay Social Security benefits.
c. an increase in the number of workers paying Social Security taxes.
d. either (a) or (b)
e. either (a) or (c)
5. Given the structure and level of gross replacement rates and the expected future growth of labor earnings subject to the payroll tax, the tax rates used to tax payrolls were increased in the 1980s because:
a. the number of retirees per worker will increase.
b. the number of retirees per worker will decrease.
c. wages are expected to decline.
d. the size of the work force is expected to increase.
6. Which of the following is likely to increase the net federal debt as a share of GDP?
a. a federal budget surplus.
b. a federal budget deficit.
c. a recession.
d. either b or c.
7. The asset-substitution effect of the Social Security retirement system leads all workers to:
a. save more for retirement.
b. save less for retirement.
c. save absolutely nothing for retirement.
d. work more
8. Which of the following is a consequence of a growing federal budget deficit in the United States?
a. A decrease in the federal debt outstanding.
b. An increase in the federal debt outstanding.
c. A decrease in the portion share of federal government expenditures that must be allocated to interest in the future.
d. An increase in national saving.
9. The induced-retirement effect of the Social Security pension system induces workers to:
a. save less for retirement.
b. save more for retirement.
c. reduce savings for retirement to zero.
d. work more after retirement.
10. Unemployment insurance benefits are:
a. financed by payroll taxes levied on workers.
b. financed by payroll taxes levied on employers.
c. both (a) and (b)
d. financed by sales taxes.
11. Which of the following is true about the Social Security pension system in the United States?
a. Pensions received by retired workers are based entirely on their contributions to the Social Security pension trust fund and the investment return on that fund.
b. Pensions received by married retirees with dependents are greater than that received by those without dependents.
c. Gross replacement rates are inversely related to preretirement earnings.
d. both (b) and (c)
12. Which of the following can decrease tax rates necessary to pay pensions for a pay-as-you-go pension system?
a. an increase in replacement rates
b. a decrease in the retirement age
c. an increase in the size of the work force
d. an increase in the number of retirees
13. Unless legislation is introduced to change the normal retirement age, people born in 1960 or later will be able to retire with full Social Security benefits at age:
14. The earnings test for retirees:
a. increases their incentive to work.
b. is applied to all retirees.
c. is applied only to retirees below normal retirement age.
d. reduces pension benefits by $1 for each $2 of earnings.
e. both (c) and (d)
15. A nation has 40 million current retirees and a work force of 100 million. Which of the following is true?
a. The replacement rate is 40 percent.
b. The replacement is 2.5.
c. The dependency ratio is 0.4.
d. The dependency ratio is 2.5.
16. Social Security tax rates can be reduced if:
a. taxable wages decline.
b. the retirement age is lowered.
c. the retirement age is raised.
d. the work force decreases in size.
17. A retiree subject to the earnings test under Social Security:
a. can earn as much as he or she chooses without losing Social Security pension benefits.
b. has his or her Social Security pension benefits reduced by one dollar for each dollar of labor earnings.
c. has his or her Social Security pension benefits reduced immediately by one dollar for each three dollars of labor earnings.
d. has his or her Social Security pension benefits reduced by one dollar for each two dollars of earnings after a certain minimum amount per year.
18. A pay-as-you-go social security retirement system is:
a. exemplified by the current U.S. social security system.
b. exemplified by the current Chilean social security system.
c. designed to have retirees set aside a contribution specifically for themselves during their earlier working life.
d. both (a) and (b).
19. Approximately, what percentage of beneficiaries of U.S. Social Security are retired workers?
20. The Social Security Act was implemented in the United States in:
Government and Health Care
1. In the United States the government pays the health bills of 90 percent of the population.
2. The American system of health care is financed by a mix of private and government insurance programs that pay over 80 percent of the health care bills for U.S. citizens.
3. Spending per person on health care in the United States is less than in the United Kingdom where national health insurance finances health expenditures.
4. Government spending on health care is declining as a percent of total government spending.
5. Medicare is a government program of health insurance for the elderly.
6. Exclusion of employer-provided health insurance to employees is an indirect subsidy to private provision of health insurance.
7. Third-party payments for health care services increase the quantity of health care demanded by reducing out-of-pocket costs to patients.
8. An increase in coinsurance and deductibles for health insurance can contribute to a reduction in expenditures on health care.
9. Half of Americans do not have health insurance coverage.
10. Under national health insurance in Great Britain, the price system is used to ration health care.
11. Approximately 16 percent of GDP was allocated to provision of health care in the United States as of 2006.
12. Individuals in the United States, on average, pay 50 percent of their health care costs out-of-pocket, and the remaining 50 percent is paid by insurance, governments, and charity.
13. Asymmetric information in the market for health care occurs when sellers of medical care are better informed about cost and quality of care than buyers.
14. Because of third-party payment for services in the market for health care, the price paid by buyers is less than the payment sellers receive, and the marginal social cost of health care exceeds its mar¬ginal social benefit.
15. Medicaid costs are paid entirely by the federal government.
16. Healthcare expenditures in the U.S. are projected to be 20% of GDP by 2017.
17. Asymmetric information can occur when the provider of a service is better informed than the consumer of the service.
18. A risk averse individual prefers to pay certain modest costs in exchange for possible unforeseen high costs.
MULTIPLE CHOICE QUESTIONS
1. Most of the medical bills of Americans in the United States are paid by:
a. the patients.
b. private and government health insurance.
2. Since 1960, expenditures on health care as a percent of GDP has:
a. been cut in half.
b. nearly tripled.
c. remained the same.
3. The government program that provides the health insurance to the poor in the United States is called:
a. national health insurance.
d. employer-provided health insurance.
4. Which of the following programs accounts for the greatest amount of government expenditures on public health in the United States?
b. worker’s compensation
c. the Public Health Service
d. medical research
5. Which of the following subsidizes private provision of health insurance?
c. the Public Health Service
d. tax exclusion of the value of employer-provided health insurance to workers
6. Which of the following could help decrease the rate of increase of spending on health care in the United States?
a. a reduction in the deductibles on private health insurance policies
b. an increase in the coinsurance rate on health insurance and subjecting a larger volume of ser¬vices to coinsurance
c. extension of Medicaid insurance to all persons who are poor
d. a reduction in the coinsurance rate on health insurance and subjecting a smaller volume of ser¬vices to coinsurance
7. Which of the following is an example of the “moral hazard of health insurance”?
a. an increase in the number of surgeries prescribed for benign prostate disease beyond the point at which the marginal benefit equals the marginal cost
b. a decreased willingness of individuals to go to the doctor for minor ailments because of increases in coinsurance rates
c. an underallocation of resources to medical care because of monopoly power of hospitals
d. experience rating of health insurance groups by health insurers
8. A third-party payment system for health care:
a. results because of externalities in the production of health care services.
b. encourages more than the efficient amount of resources to be allocated to health care.
c. encourages patients and health care providers to economize on the use of health care resources.
d. means that patients pay the full price for health care services they consume.
9. Which of the following services is typically not covered under private health insurance and Medicare in the United States?
a. treatment for heart attack
c. office visits to physicians
d. long-term care services
10. Under national health insurance as operated in Great Britain,
a. the British system pays fees equal to half of the costs of services provided to them.
b. general practice physicians are paid on a per-patient rather than on a per-unit-of-service basis.
c. patients requiring surgery can pick their surgeons and can usually obtain the surgery in a matter of days, even if it is not an emergency.
d. there are no government limits on health care spending by hospitals.
11. Which of the following is true about the Medicaid program in the United States?
a. It is a program of health insurance for the elderly.
b. Its costs are paid entirely by the federal government.
c. It is a program of health insurance for the poor.
d. Its costs have been declining in recent years.
12. In the United States, individuals pay approximately what percent of the cost of their medical care directly to providers?
a. 100 percent
b. 50 percent
c. 15 percent
13. The percent of total health care costs in the United States paid for by governments is approximately:
a. 90 percent.
b. 45 percent.
c. 25 percent.
d. 10 percent.
14. The system of third-party payment for medical care in the United States has which of the following effects in the market for health care?
a. It improves efficiency in the market.
b. It causes the marginal social benefit of health care to exceed its marginal social cost.
c. It causes the marginal social cost of health care to exceed its marginal social benefit.
d. It results in less than the efficient quantity of health care services.
15. Which of the following is true about the Medicare program in the United States?
a. It is only available to those who pass a means test.
b. It is available to all citizens over the age of 65.
c. The costs are completely financed by fees paid by insurees.
d. It places no limits on reimbursement to medical care providers.
16. What would be the effect of having no health insurance available?
a. The quantity of healthcare would be set at where the marginal benefit and marginal cost are equal.
b. Excess demand for healthcare would be the result because the quantity supplied would be at a level where the marginal benefit exceeds the marginal cost.
c. Excess supply for healthcare would be the result because the quantity supplied would be at a level where the marginal benefit would be below the marginal cost.
d. the quantity of healthcare would be at an inefficient level.
17. The elderly are what proportion of beneficiaries of Medicare?
18. What is the moral hazard associated with third party payment for health services?
a. The recipient of the service is not as informed as the provider of the service.
b. The recipient of services tends to decline more services than they should.
c. The recipient of services tends to have more services than what is needed relative to the efficient level of services.
d. There is no moral hazard.
19. Which is not reason for excalating healthcare costs in the U.S.?
a. Increase in malpractice insurance.
b. Cross-subsidization of patients who cannot pay for healthcare or insurance.
c. Overuse of new technology.
d. Both (b) and (c).
20. If the quantity of healthcare is more than the efficient quantity, what is the consequence?
a. Some will not have access to healthcare that would have access at the efficient level.
b. The healthcare will suffer in quality.
c. Capital could be more efficiently spent elsewhere leading to less overall productivity.
d. Lower marginal costs and marginal benefits.