Answer to Question #309196 in Macroeconomics for Amooooo

Question

When government is paying old age pension ,it is intervening in the economy

Answer 1

When government is paying old age pension, it is intervening in the economy

Pension is a collective agreement that manages employee and employer savings and retirement undertaking.

Pension contributes to the economy in many ways;

Through pension schemes, the government is able to pool a lot of resources from the citizens of a country. Thos e pooled resources; the government is able to invest those resources to various projects in the country. The government is able to invest in infrastructure of the country, provision of social amenities to its citizens and all the mega projects that need funds.

At old age, there is a reduced income to its citizens, through pension scheme one is able to access those funds which might accrued over the years. These play a significant role in making life easier for the senior citizens in a country. This enables them to live a comfortable life and overall live longer and happily after retirement.

Pension contributed and its accrued benefits enjoy tax reliefs. These significantly benefit the contributors as they may increase the overall benefits to their income.

On the cash flow on the economy, there’s increased cash flow as the government invests in projects in the economy which positively impacts on the liquidity of the economy.