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November 2005 Course FM/2 Examination 1. An insurance
November 2005 Course FM/2 Examination 1. An insurance

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Two View ofthe Effects of Governemnt Budget Deficits in the 1980s

... income, increasing both private consumption expenditures and pnvate saving. Since par’t of the tax cut or transfer payment is spent for consumption, the nse in private saving is less than the deficit increase. Thus, national saving declines, Such a decline also indicates that desired aggregate deman ...
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Impact of Inflation on Fiscal Aggregates in Austria

... allowances (examples of the latter two are shown in chart 2) led to a substantial increase in implicit wage tax rates11 over this time horizon. This is ­illustrated by chart  1, which shows ­ separate ­figures for employees and pensioners. This fiscal drag creates significant room for maneuver for t ...
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Pensions crisis

The pensions crisis is a predicted difficulty in paying for corporate, state, and federal pensions in the United States and Europe, due to a difference between pension obligations and the resources set aside to fund them. Shifting demographics are causing a lower ratio of workers per retiree; contributing factors include retirees living longer (increasing the relative number of retirees), and lower birth rates (decreasing the relative number of workers, especially relative to the Post-WW2 Baby Boom). There is significant debate regarding the magnitude and importance of the problem, as well as the solutions.For example, as of 2008, the estimates for the underfunding of U.S. states' pension programs range from $1 trillion using the discount rate of 8% to $3.23 trillion using U.S. Treasury bond yields as the discount rate. The present value of unfunded obligations under Social Security as of August 2010 was approximately $5.4 trillion. In other words, this amount would have to be set aside today such that the principal and interest would cover the program's shortfall between tax revenues and payouts over the next 75 years.Some economists question the concept of funding, and, therefore underfunding. Storing funds by governments, in the form of fiat currencies, is the functional equivalent of storing a collection of their own IOUs. They will be equally inflationary to newly written ones when they do come to be used.Reform ideas are in three primary categories: a) Addressing the worker-retiree ratio, via raising the retirement age, employment policy and immigration policy; b) Reducing obligations via shifting from defined benefit to defined contribution pension types and reducing future payment amounts (by, for example, adjusting the formula that determines the level of benefits); and c) Increasing resources to fund pensions via increasing contribution rates and raising taxes.
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