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The solutions to question 1-7 in eco 101 homework assignment 6. It includes definitions, calculations, and comparisons between social security and private insurance.
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Instructions: Complete the following questions and turn in your solutions at the end of the class lecture on the date due. Remember to include your name and student number on your submitted document.
Question #1 โ Definitions
i. Social Security โ (see page 308) ii. Entitlement โ (see page 308) iii. Pay-As-You-Go (PAY-G) Social Security โ (see page 309) iv. Statutory right โ (see page 310) v. Contractual Right โ (see page 310) vi. Individual Equity โ(see page 310) vii. Social Adequacy โ(see page 310) viii. Initial Old โ The persons present when the PAY-G system starts. That is, those of retirement age who immediately start to receive benefits without having to incur any costs or pay social security taxes. ix. Progressive Tax โ (see page 311) x. Proportional Tax โ (see page 311) xi. Replacement Rate โ (see page 312) xii. Adverse Selection โ (see page 316 โ When an individual may choose to opt out of a program because their expected gain is less than their expected loss) xiii. Gross Domestic Product (use the chapter 15 definition) โ (see page 356) xiv. Recession โ (see page 328) xv. Labor Force โ (see page 329) xvi. Labor Force Participation Rate โ (see page 329) xvii. Unemployed Person โ (see page 331) xviii. Unemployment Rate โ (see page 331) xix. Discouraged Worker โ (see page 334) xx. Frictional Unemployment โ (see page 336) xxi. Structural Unemployment โ (see page 336) xxii. Full Employment โ (see page 338) xxiii. Cyclical Unemployment โ (see page 337) xxiv. Minimum Wage โ (see page 340) xxv. Inflation โ (see page 342) xxvi. Deflation โ (see page 342) xxvii. Consumer Price Index โ (see page 343) xxviii. Hyperinflation โ (see page 345) xxix. Purchasing Power โ (see page 345)
Question #2 โ Biotech and Agriculture a) List 3 benefits of biotechnology in agriculture
_1. cheaper food
b) List 3 criticisms cited by opponents of biotechnology in agriculture
_1. environmental risks
Question #3 -
Question #4 โ a) What are the 7 characteristics of social security?
_1. compulsory
b) What are the 7 characteristics of private insurance?
_1. voluntary
c) What characteristics are different between social security and private insurance? Different โ items 1-6 in a) above and 1-5 in b) Similar โ items 7,8 in a) and 6,7 in b)
ii) In year 2 there are 11,000 old workers (those that were young in year 1, and 12,100 young workers. How much does each old person receive?
=
=$11,000 per old person
iii) In year 3 there are 12,100 old workers and 13,310 young workers. How much does each old person receive?
=
=$11,000 per old person
b) Scenario II โ A shrinking population. Now assume that we are in a situation where the aged population is getting larger than the young population (such as the current situation with the impending retirement of so many from the baby boom generation). Some ways the old population can become larger than the young are due to longer life expectancy, slower population growth rate, etc. Compute how much each of the old people will receive in the following scenarios if all young people had contributed $10,000 when they were young: i) In year 60 there are 100,000 old workers and 90,000 young workers. How much does each old person receive?
=
=$9,000 per old person
ii) In year 61 there are 90,000 old workers (those that were young in year 60, and 81,000 young workers. How much does each old person receive?
=
=$9,000 per old person
iii) In year 62 there are 81,000 old workers and 72,900 young workers. How much does each old person receive?
=
=$9,000 per old person
c) Why might the people not like what is happening in b) above as compared to a)?
- The amount of money they are getting out is less than what they are putting in. This essentially amounts to a negative return on social security for people in scenario b)
Question # 7 -
i) compute the labor force participation rate
- recall that the labor force participation rate was
so =
=0.50 or 50%
ii) compute the unemployment rate
- the unemployment rate is the number of people actively looking
for work divided by the labor force
=0.05 or
5%
Question # 8 -