Introduction to Macroeconomics Econ 104 a,c,d,h – Spring 2012
Worksheet 7 – Social Security, Aggregath Supply and Demand
Due in discussions week of April 13 or on Moodle
1. Explain how Social Security is a social insurance program, not an individual retirement plan.
Life insurance costs are paid entirely by workers. Private accounts cannot substitute for Social
Securities guaranteed benefits. Private accounts are individual savings accounts whereas
Social Security is a social insurance program.
2. How does the Social Security system work? (Be specific…how does it get it’s funding, how
does it pay out benefits?)
Social Security insures workers and their families against possible loss of earnings due to
retirements, disability, and death. Revenue to Social Security Trust Fund at the end of 2010
was worth 2.608 trillion dollars.
3. Is Social Security in Crisis, broke, or in serious trouble for the next 5,10,20 years?
The system will pay out more in benefits than it receives in payroll taxes. While the surplus
from only tax revenue did fall during the recession, when you add in all revenue to social
security, including the trust fund still grows by almost 70 billion in 2010.
4. What is the social security trust fund? How much is it worth? What is it for?
The Social Security Trust Fund at the end of 2010 was worth 2.608 trillion dollars, but only
2.540 trillion in 2009.
5. Draw the AD and AD supply curves on a graph. How does this graph show us the level of
Economic activity (Income, GDP) but also show us what is going on with inflation or
deflation? The Aggregated Demand is the total quantity of goods and services demanded by
households, businesses, government and the international sector at various pr