10 Questions
What is the primary reason why a shortage of hours worked is associated with transitory income?
Because it is related to the loss of transitory income
What is the effect of a lump-sum demogrant on work incentives?
It reduces work incentives due to a pure leisure-inducing income effect
What is the primary reason why welfare programs can have an adverse effect on work incentives?
Because they have a 100% clawback on earned income
What is the purpose of a negative income tax?
To provide a guaranteed income to low-income individuals
What is the effect of a negative income tax on work incentives?
It reduces work incentives due to the implicit tax rate
What is the formula for the negative income tax?
Y = G + (1 - t)E
Which of the following is a possible solution to improve the work incentives of welfare programs?
Reduce the implicit tax rate
What is the primary difference between a lump-sum demogrant and a welfare benefit?
The type of income it is intended to replace
What is the effect of a 100% clawback on earned income on work incentives?
It reduces work incentives
What is the purpose of the Child Tax Credit?
To provide a subsidy to families with children
This quiz covers the effects of wage subsidies on labour supply, including their impact on welfare programs and work incentives.
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