True/False
Indicate whether the
statement is true or false.
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1.
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A 401(k) plan is a type of defined benefit plan.
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2.
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Social Security requires workers to pay taxes to the Social Security
Administration. As those taxes are collected by the SSA, they are largely used to pay Social
Security beneficiaries during that same time period. In return, the government promises today’s
workers that the government will pay them benefits in the future by taxing future workers.
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3.
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When or if the Social Security Trust Fund is depleted, which is currently
forecasted to happen in the late 2030’s, then Social Security will be bankrupt and unable to
pay any benefits.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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4.
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The life cycle theory of retirement breaks up an individual's working life
into these three periods:
a. | youth, middle age, and old age. | b. | training, working, and
retiring. | c. | education, work, and enjoyment. | d. | not working, working, and not
working. |
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5.
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Which of the following statements about Social Security is true?
a. | The Social Security program offers retirees retirement benefits for up to 20 years
after retirement. | b. | Social Security is funded with income tax
revenues. | c. | Social Security requires workers to contribute to an account that is held in their
name at the Treasury and invested in government and highly rated private sector
bonds. | d. | Social Security transfers income from current workers to current
retirees. |
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6.
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Which of the following best describes the adverse selection problem in
healthcare?
a. | People don't know how much they will need to pay for healthcare in old age,
adding to the risks of old age. | b. | The poor are exposed to medical disasters
because they cannot afford to pay for insurance. | c. | The people who are selected for jobs with
health insurance benefits are often the people who least need the health
insurance. | d. | Healthier people are less likely to buy health insurance because they are less likely
to need it, meaning that a health insurance plan is likely to have the sickest people in it, driving
up premiums. |
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7.
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The "individual mandate" included in President Obama's health
insurance reform bill was designed to address which problem?
a. | The moral hazard problem. | b. | The healthcare uncertainty
problem. | c. | The healthcare poverty problem. | d. | The adverse selection
problem. |
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8.
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In 2009, the largest single source of funds for adults 65 and older was
a. | earnings from work. | b. | Social Security payments. | c. | public
pensions. | d. | income from assets. |
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9.
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Which of the following is a recent trend observed in retirement plans in the
United States?
a. | Participation in retirement plans is declining as workers begin to rely more on
Social Security. | b. | Many companies have been switching from defined benefit plans to defined contribution
plans. | c. | More Americans are opting out of Social Security because of the low rates of return
compared to private alternatives. | d. | More employer retirement plans are beginning to
switch from defined contribution plans to defined benefit plans. |
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10.
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In 2010, if you earned $201,000 in income, you would pay approximately
__________ in taxes to fund Social Security; if you earned $1,020,000 in income, you would pay
approximately __________ in taxes to fund Social Security.
a. | $12,460; $63,240 | b. | $6,620; $6,620 | c. | $5,840;
$56,620 | d. | $94,200; $913,200 |
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