Aging Population and Fiscal Strain

Steps:

• Identify the demographic shift: Japan's population has a growing elderly proportion, leading to more retirees relative to workers.
• Analyze economic effects: Fewer workers mean reduced tax revenues and higher public spending on pensions and healthcare.
• Evaluate government response: To support the elderly, the government increases expenditures, often funded by borrowing.
• Determine overall impact: This creates a larger budget deficit as spending outpaces revenue.

Why A is correct:

• An aging population increases fiscal pressure per the dependency ratio (elderly-to-working-age population), raising pension and healthcare costs that exceed tax income, widening the government budget deficit.

Why the others are wrong:

• B: Fewer workers reduce labor supply, slowing economic growth rather than increasing it.
• C: Aging populations typically increase immigration needs, not emigration rates.
• D: Labor shortages from fewer young workers push toward capital-intensive, automated production, not labor-intensive methods.

Final answer: A