STAYER ECO 450 Entire Course STAYER ECO 450 Week 11 Final Exam | Page 3

a . measures a worker ’ s monthly retirement benefit divided by monthly earnings before taxes in the year prior to retirement .
b . measures a worker ’ s monthly retirement benefit divided by monthly earnings after taxes in the year prior to retirement .
c . is an increasing function of gross monthly earnings prior to retirement . d . is independent of gross monthly earnings prior to retirement .
3 . A worker earns $ 2,000 per month before taxes . He pays $ 140 per month payroll tax on those wages . In addition , the income taxes on those wages are $ 360 per month . On retirement , the worker receives a Social Security pension of $ 750 per month . Which of the following statements is true ?
a . The worker ’ s gross replacement rate is 50 percent . b . The worker ’ s net replacement rate is 50 percent . c . The worker ’ s net replacement rate is 38 percent . d . The worker ’ s net replacement rate is 75 percent .
4 . The growth in hourly wages over the past 50 years has averaged about 2 percent per year . However , the growth in Social Security pensions has far exceeded this 2- percent rate . The growth in tax revenue to finance Social Security benefits in excess of 2 percent per year can be accounted for by :
a . increases in payroll tax rates . b . use of other taxes beside the payroll tax to pay Social Security benefits . c . an increase in the number of workers paying Social Security taxes . d . either ( a ) or ( b ) e . either ( a ) or ( c )
5 . Given the structure and level of gross replacement rates and the expected future growth of labor earnings subject to the payroll tax , the tax rates used to tax payrolls were increased in the 1980s because :
a . the number of retirees per worker will increase . b . the number of retirees per worker will decrease .