If households ignore effects on future generations, a pay as you go social security system:
A)raises current national savings.
B)reduces investment.
C)raises the future capital stock.
D)all of the above.

Question

Quizplus · Accepted Answer

A pay as you go social security system reduces investment because the contributions made by current workers are used to pay for benefits for current retirees instead of being invested for future growth. If households ignore the effects on future generations and continue to contribute to the pay as you go system, then there will be less savings available for investment and therefore reduced investment. However, this does not raise the future capital stock.

If Households Ignore Effects on Future Generations, a Pay as You