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Medical Questions
Your Question
Suppose the government establishes a social security system in period T that provides benefit b for each old person forever. In period T the government finances the benefits by issuing debt. This debt is then paid off in period T+1 through lump sum taxes on the young. In periods T+1 and later, lump sum taxes on the young finance social security payments to the old. Develop the equation on the costs and benefits to the young born in T+1 (special case) to describe the relationship between the real interest rate and the population growth rate that must hold for this program to benefit this specific generation.
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