Question

Economists call pensions "defined benefits" plans, because:

a. pension distributions rise with the rise in the CPI
b. pensions have traditionally been set as a fixed nominal dollar amount per year at retirement
c. pensions are always adjusted yearly for inflation
d. pensions are similar to borrowers who benefit from rising inflation

Answer 1

The correct answer is letter "B": pensions have traditionally been set as a fixed nominal dollar amount per year at retirement.

Step-by-step explanation:

Pensions are retirement plans employees enroll during their working years. There are different types of pensions being the most common the 401(k), Individual Retirement Account (IRA), and Roth IRA each one with particular features. What all of them have in common is that they allow retired individuals to receive a fixed stream of income per year after they officially stop working. Therefore, that is the reason why economists call pensions as "defined benefits" plans.