When the Social Security system begins running a deficit, the bonds in the trust fund will be drawn down. The funds to redeem these bonds will have to come from
A) higher taxes, spending reductions in other programs, or additional government borrowing.
B) the surplus funds deposited in governmental banking accounts.
C) equity capital being liquidated.
D) the sale of private equities and securities that the government has been purchasing with the funds.

Question

Quizplus · Accepted Answer

The Social Security trust fund holds government bonds, which are essentially IOUs from the government. When these bonds need to be redeemed, the government must find the money through higher taxes, spending cuts, or borrowing, as it does not have separate funds set aside for this purpose.

When the Social Security System Begins Running a Deficit, the Bonds