Question

Answer whether the statement is True or False or Uncertain. EXPLAIN in detail.

According to the wealth substitution effect, private saving increases due to social security taxes.

Government’s health care program can solve both moral hazard and adverse selection problems.

The only reason why countries have social security is to improve the economic status of the aged.

As education is a private good, the government should not provide it.

Individuals always prefer cash-transfers to in-kind transfers.

Answer 1

1) False

( social security taxes result in a decline in private savings .The money paid as tax would have been saved.)

2) False

( Government run pools are an inefficient solution for adverse selection.)

3) False

( social security programs target all the disadvantaged sections of the society.)

4) False

( private sector is motivated by profit. So education can't be entirely left to the sector)

5) True

(Because it enables them to choose precisely which goods and services they need the most)