Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 20, Problem 6QCMC
To determine
The impact of phase out of anti-poverty benefits when income increases.
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Antipoverty programs are often set up so that the amount of government benefits
will decline substantially as poor people earn more income. This can cause
a poverty trap
an income inequity
a poverty line
a safety net
1. A government economist, Mollie Orshanky, first calculated this in 1963 by multiplying the cost of a very minimal diet by 3, as a 1955 government study had determined that the typical American family spent 1/3 of its income on food.
Group of answer choices
a. episodic poverty
b. popularity index
c. welfare line
d. poverty line
The Earned Income Tax Credit (EITC) is a way of subsidizing those who are unable to work and have no earnings. true or false?
a. true
b. false
Chapter 20 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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- The income threshold used by the organization International Poverty Line for extreme poverty a. Is a guideline for policy makers and not an exact “tipping point” at which point a person falls into extreme poverty. b. Is adjusted for price differences across countries. c. Is one of several thresholds sometimes used to discuss poverty that show that the percentage of people living in poverty has been declining in recent decades. d. Is agreed on by all organizations working on poverty. e. All of the above except d.arrow_forwardWhat is "Pareto Efficiency"? This is a key concept in welfare economics. Write at least a paragraph to describe this concept and give some examples.arrow_forwardIn the government of a country's budget the finance minister proposed to raise the tax on cigarettes. He also proposed to increase income tax on individuals earning more than $100,000 per annum. What possible welfare objective can you think of from these proposals?arrow_forward
- Suggest a relevant government policy that would help with tax dodgersarrow_forwardPoverty 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…arrow_forwardwhat would happen if Governments increase the level of welfare payments.arrow_forward
- Government introduces a new income guarantee program for low-income families. Consider the program with an income guarantee of $5000 and a benefit reduction rate of 25%. A person can work up to 2,000 hours per year at $15 per hour. a. Draw the person's budget constraint without and with the income guarantee. Label as many things as you humanly can. b. Who would be affected by this program and who would not (use yearly income and number of hours worked to describe the affected and unaffected groups)?arrow_forwardTo what extent can the government improve economic situation by changing theinterest rate?arrow_forwardWhat makes the Earned Income Tax Credit (EITC) different from other poverty-fighting programs? The amount of the credit is doubled if the head of household is attending college. The tax credit is phased out gradually, rather than at a specific income cutoff point. The amount of the credit is not determined by the number of dependent children in the household. The EITC doesn't require the recipient to pay a minimum amount of income tax in order to receive the credit. It creates less of an incentive to work than other programs.arrow_forward
- Suppose you go to a doctor, but your health insurance plan reimburses you for only 80 percent of the bill. This is an example of: A. coinsurance.B. a deductible.C. monopsony power.D. a deferred benefit plan.arrow_forwardWhat is the advantage of having autarky nation. Explain in detail.arrow_forwardWhy must the government should prioritize the end of poverty and hunger?arrow_forward
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