Suppose the Earned Income Tax Credit gives workers 40% of their earnings for earnings up to a
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- Suppose the Earned Income Tax Credit gives workers 40% of their earnings for earnings up to a maximum tax credit of $4800, then begins to reduce the credit by 20% for every dollar of earnings above $21,000. For an individual who earns $15 an hour and can work a maximum of 4000 hours in a year
- Draw the budget constraints before and after this EITC goes into effect. Label the number of hours of work and money income for each kink in the budget constraint.
- Draw indifference curves before and after the EITC goes into effect for 4 people:
- A does not work at all before the EITC goes into effect
- B works 1200 hours
- C works 2000 hours
- D works 3500 hours
- Explain the income and substitution effects of the EITC on these 4 people
- State how hours of work and money income will change (more, less, no change)
Related Book For
The Economics of Women Men and Work
ISBN: 978-0132992817
7th edition
Authors: Francine D. Blau, Marianne A. Ferber, Anne E. Winkler
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