Defined benefit pension plans stipulate contributions will be made to the employer’s retirement fund Bestows the risk of low portfolio returns to the employee Bestows the risk of low portfolio returns to the employer Will benefit employers if retirees live longer The signaling mechanism for the efficient allocation of capital in an economy is: Price of goods Inflation GDP Interest rates The following is not an impediment to the free flow of money in an economy: Weak legal system Institutional rigidity Perfect information between savers and users Corruption
Functions of the Federal Reserve System
The Federal Reserve System looks after the financial activities and operations of the banking system. It is the apex body that has complete control over the banking regulations. All the guidelines regarding the banking system, money supply, and formulation of the monetary policy come under the purview of the Federal Reserve System. The New York Fed also helps in drafting the monetary policy and supervising the financial system.
Elastic and Inelastic Markets
Measuring the change in percentage of an economic variable with respect to change in a different economic variable is known as elasticity. This change in percentage results in a change in price concerning changes in other factors. In simple terms, when one factor brings a change to another factor, it is called elasticity.
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Defined benefit pension plans
stipulate contributions will be made to the employer’s retirement fund
Bestows the risk of low portfolio returns to the employee
Bestows the risk of low portfolio returns to the employer
Will benefit employers if retirees live longer
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The signaling mechanism for the efficient allocation of capital in an economy is:
Price of goods
Inflation
GDP
Interest rates
-
The following is not an impediment to the free flow of money in an economy:
Weak legal system
Institutional rigidity
Perfect information between savers and users
Corruption
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Defined benefit pension plans stipulate contributions will be made to the employer's retirement fund, with the employer assuming the responsibility for ensuring that sufficient funds are available to pay the benefits promised to employees. In this type of pension plan, the risk of low portfolio returns is primarily borne by the employer, as they are responsible for ensuring that the funds are sufficient to meet their obligations to retirees.
If retirees live longer than expected, this can result in additional costs for the employer, as they must continue to pay benefits for a longer period. On the other hand, if the portfolio returns are higher than expected, the employer may benefit from lower costs and improved financial stability.
Overall, defined benefit pension plans shift the risk of low portfolio returns and the costs associated with longer retiree life expediencies to the employer, while providing employees with a guaranteed source of retirement income.
Therefore, Option 1 is correct.
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