Author Question: In a frictionless world A) Fully funded social security must necessarily make everyone better ... (Read 41 times)

FButt · **on:** Jun 30, 2018

In a frictionless world

A) Fully funded social security must necessarily make everyone better off, as it provides for retirement.
B) Fully-funded social security is a constraint on private saving behavior, and therefore cannot make anyone better off.
C) Fully funded social security is always preferred to pay-as-you-go social security.
D) Fully funded social security is more efficient, because it is a private program instead of a government program.

Question 2

In the classical model, what is the impact of changes in the demand for goods and services on aggregate output? Do they affect any real variables?

What will be an ideal response?

dantucker · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

B

Answer to Question 2

Factors such as the quantity of money, the level of government spending, and the level of demand for investment goods by the business sector are all demand-side factors and have no role in determining output and employment. Also, changes in taxes, to the degree that they affect the demand side, will neither affect output nor employment. The level of aggregate demand has no effect on output because output and employment are supply-determined.