Poverty Trap 7. The American Poverty Trap is a phrase used to describe the tendency for individuals below the poverty line to remain there due to the structure of America's safety-net income stabilization programs. 8. The issue is that federal and state benefits decline as a worker goes from being unemployed to becoming fully employed. As earned income increases, the amount of benefits fall. 9. Thus, the marginal benefit of working is increased income, but the marginal cost includes declining benefits, and a loss of leisure time. 10. Federal and state programs are designed so that as the worker nears the poverty line, the increase in income is matched by a decline in benefits. 11. Thus, the worker gains very little by working more! This structure is actually a disincentive to work. 12. What would be a better solution? End all poverty programs? Provide all citizens a poverty level income stipend? What do you think? What have you been told is the way to avoid being trapped in poverty? 5:05 / 5:58 YouTube Q E3 CC The economic theory that explains why citizens become caught in the American poverty trap? Select one: a. diminishing returns to production b. rational self-interest c. labor theory of work versus leisure tradeoff d. labor specialization
Poverty Trap 7. The American Poverty Trap is a phrase used to describe the tendency for individuals below the poverty line to remain there due to the structure of America's safety-net income stabilization programs. 8. The issue is that federal and state benefits decline as a worker goes from being unemployed to becoming fully employed. As earned income increases, the amount of benefits fall. 9. Thus, the marginal benefit of working is increased income, but the marginal cost includes declining benefits, and a loss of leisure time. 10. Federal and state programs are designed so that as the worker nears the poverty line, the increase in income is matched by a decline in benefits. 11. Thus, the worker gains very little by working more! This structure is actually a disincentive to work. 12. What would be a better solution? End all poverty programs? Provide all citizens a poverty level income stipend? What do you think? What have you been told is the way to avoid being trapped in poverty? 5:05 / 5:58 YouTube Q E3 CC The economic theory that explains why citizens become caught in the American poverty trap? Select one: a. diminishing returns to production b. rational self-interest c. labor theory of work versus leisure tradeoff d. labor specialization
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:Poverty Trap
7. The American Poverty Trap is a phrase used to describe the tendency for
individuals below the poverty line to remain there due to the structure of
America's safety-net income stabilization programs.
8. The issue is that federal and state benefits decline as a worker goes from
being unemployed to becoming fully employed. As earned income
increases, the amount of benefits fall.
9. Thus, the marginal benefit of working is increased income, but the
marginal cost includes declining benefits, and a loss of leisure time.
10. Federal and state programs are designed so that as the worker nears the
poverty line, the increase in income is matched by a decline in benefits.
11. Thus, the worker gains very little by working more! This structure is
actually a disincentive to work.
12. What would be a better solution? End all poverty programs? Provide all
citizens a poverty level income stipend? What do you think? What have
you been told is the way to avoid being trapped in poverty?
D 5:05 / 5:58
* YouTube [3
CC
The economic theory that explains why citizens become caught in the American poverty trap?
Select one:
a. diminishing returns to production
b. rational self-interest
c. labor theory of work versus leisure tradeoff
d. labor specialization
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education