Question

Use the social security model to answer this question. Suppose that the government establishes a social security program in period T, which provides a social security benet of b (in terms of consumption goods) for each old person forever. In period T the government nances the benets to the current old by issuing debt. This debt is then paid of in period T +1 through lump-sum taxes on the young. In periods T +1 and later, lump-sum taxes on the young nance social security payments to the old.
a. Show, using diagrams, that the young and old alive at time T all benet from the social security program under any circumstances.
b. What is the effect of the social security program on consumers born in periods T + 1 and later? How does this depend on the real interest rate and the population growth rate?

Answer 1

I think option A is correct

Answer 2

$\huge\bold{He¥\: Mate}$

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➡️Correct Option -: A,✔️✔️
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