ACCA Applied Knowledge · Business and Technology · Social and demographic factors
A government is concerned that a falling birth rate will raise the dependency ratio. Which of the following correctly describes the dependency ratio and the likely effect of the change?
The dependency ratio is the number of non-working dependants, mainly children and retirees, relative to the working-age population. A falling birth rate combined with more older people means fewer workers support more dependants, so the ratio rises and puts pressure on pensions, healthcare and taxation.
- AThe ratio of non-working dependants to the working-age population, which rises as the working-age share shrinks relative to older peopleCorrect
- BThe ratio of exports to imports, which rises as fewer babies are born
- CThe ratio of urban to rural residents, which rises as families have fewer children
Explanation
The dependency ratio compares dependants (the young and the old) with the working-age population. With fewer births and more older people, the working-age group shrinks relative to retirees, so each worker supports more dependants, which raises fiscal pressure. The other definitions are unrelated to demography.
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