Question

Question 39 12 pts Explain how the Social Security program affects the economy. Be sure to include the direct costs and opportunity costs. If the cost of the Social Security program is to high, what is the economic justification to continue this program? HTML Editor BIVA-A- IEE311xx, - SOOV V D1 12pt - Paragraph -

Answer 1

Answer - When the persons receive the social security benefit , the income of the persons increase. They will be able to spend a much more than they did before. Hence the spending increases. This leads to the increase in demand for goods and services and thus boosting the production of economy. Also the recipients of the SC benefits pay taxes to the government on consumption expenditure . The form of taxes may be sales tax or other indirect taxes to local government. Thus the revenue of the government also increases. Thus the social security benefits enhance the flow of capital in the economy .

If the cost of the social security programs that is they have to pay the higher taxes , gradually the spending for these social security benefits will decrease which will decrease the AD which was increased earlier. With the reduced income and spending the taxes of the government will also decrease. Thus the cost of these schemes should be less in order to maximize the benefits to the recipients , government and the economy.

The taxes on the security benefit should be less and proper channelising of the funds should be done to increase the income through accumulated funds. While increasing the profits and more focus on cost reduction , the benefits could be improved.