Final answer:
The term 'legacy debt' refers to debt incurred by the government because early generations of beneficiaries received more in benefits than they paid in taxes, often seen in Social Security programs that operate on a pay-as-you-go basis. Option A is correct.
Step-by-step explanation:
The debt incurred by the government because early generations of beneficiaries received much more in benefits than they paid in taxes is known as legacy debt. This occurs in systems like Social Security, which operates on a pay-as-you-go basis, where current workers' payments are used to fund current benefits.
Over time, with demographic changes such as the aging of the baby boomer generation, there are fewer workers paying into the system and more beneficiaries receiving benefits. This leads to a fiscal imbalance, necessitating reforms to ensure the program's long-term sustainability. A deficit differs from debt as it refers to the annual budget shortfall, whereas debt is the accumulated total of past deficits over time.
The correct answer is a. legacy debt. Legacy debt refers to the debt incurred by the government because the early generations of beneficiaries received much more in benefits than they paid in taxes. This term is often used to describe the debt accumulated by programs like Social Security and Medicare, where current workers' payments fund benefits for previous generations. The debt is owed by the government to itself, as it is held in government trust funds.