Chapter 11: Public Pensions
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers
the question.
1) A pay-as-you-go system is 1)
A) less politically popular than a fully funded system for the first generation of retirees.
B) where retirees are paid from accounts that have accumulated with interest over their working lives.
C) where there is no need for taxes since current workers pay for current retirees.
D) where current working citizens pay for current retired citizens.
2) Consumption smoothing is 2)
A) increasing consumption in high-earning years in order to offset decreased consumption in low-earning years.
B) consuming the same amount throughout your lifetime.
C) unnecessary because individuals receive public pensions in retirement.
D) reducing consumption in high-earning years in order to increase consumption in low-earning years.
3)
A fully funded plan 3)
A) requires no taxes since current workers pay for current retirees.
B) is where retirees are paid from accounts that have accumulated with interest over their working lives.
C) is more politically popular than a pay-as-you-go plan with the first generation of retirees.
D) requires current working citizens to pay for current retired citizens.
4) Pensions and annuities that account for inflation are said to be 4)
A) inflation adjusted. B) inflation indexed.
C) inflation accounted. D) inflation rated.
5) When workers save less during their working lives due to the fact that they have been contributing to their
public pension, this is known as 5)
A) the bequest effect. B) the public pension wealth effect.
C) the life cycle model. D) the wealth substitution effect.
6) Some young people may decide not to save for old age, gambling that they will supported by the public
sector when they retire. This is an example of 6)
A) adverse selection. B) consumption smoothing.
C) moral hazard. D) strategic thinking.
7) The Guaranteed Income Supplement is an example of 7)
A) a regressive tax. B) the wealth substitution effect.
C) a negative income tax. D) the retirement effect.
8) Pay-as-you-go financing is an attractive method of financing pensions if total wages and salaries grow
the rate of return. 8)
A) slower than B) faster than
C) inversely to D) at the same rate as
9) In 2013-14, the Old Age Security program and Canada and Quebec Pension Plan had a combined cost of
approximately 9)
A) $100 trillion. B) $100 million.
C) $100 billion. D) none of these answers is correct.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers
the question.
1) A pay-as-you-go system is 1)
A) less politically popular than a fully funded system for the first generation of retirees.
B) where retirees are paid from accounts that have accumulated with interest over their working lives.
C) where there is no need for taxes since current workers pay for current retirees.
D) where current working citizens pay for current retired citizens.
2) Consumption smoothing is 2)
A) increasing consumption in high-earning years in order to offset decreased consumption in low-earning years.
B) consuming the same amount throughout your lifetime.
C) unnecessary because individuals receive public pensions in retirement.
D) reducing consumption in high-earning years in order to increase consumption in low-earning years.
3)
A fully funded plan 3)
A) requires no taxes since current workers pay for current retirees.
B) is where retirees are paid from accounts that have accumulated with interest over their working lives.
C) is more politically popular than a pay-as-you-go plan with the first generation of retirees.
D) requires current working citizens to pay for current retired citizens.
4) Pensions and annuities that account for inflation are said to be 4)
A) inflation adjusted. B) inflation indexed.
C) inflation accounted. D) inflation rated.
5) When workers save less during their working lives due to the fact that they have been contributing to their
public pension, this is known as 5)
A) the bequest effect. B) the public pension wealth effect.
C) the life cycle model. D) the wealth substitution effect.
6) Some young people may decide not to save for old age, gambling that they will supported by the public
sector when they retire. This is an example of 6)
A) adverse selection. B) consumption smoothing.
C) moral hazard. D) strategic thinking.
7) The Guaranteed Income Supplement is an example of 7)
A) a regressive tax. B) the wealth substitution effect.
C) a negative income tax. D) the retirement effect.
8) Pay-as-you-go financing is an attractive method of financing pensions if total wages and salaries grow
the rate of return. 8)
A) slower than B) faster than
C) inversely to D) at the same rate as
9) In 2013-14, the Old Age Security program and Canada and Quebec Pension Plan had a combined cost of
approximately 9)
A) $100 trillion. B) $100 million.
C) $100 billion. D) none of these answers is correct.
