Question

In: Economics

Consider an income guarantee program with an income guarantee of $5,000 and a benefit reduction rate...

Consider an income guarantee program with an income guarantee of $5,000 and a benefit reduction rate (phase-out rate) of 40%. A person can work up to 2,000 hours per year at $10 per hour. (a) Draw the person’s budget constraint with the income guarantee. (b) Suppose that the income guarantee rises to $7,500 but with a 60% benefit reduction rate. Draw the new budget constraint. (c) Which of these two income guarantee programs is more likely to discourage work? Explain. (d) Draw a system of smooth indifference curves that bend the right way (i.e. bent towards the origin in the normal way we draw them in class) but would lead an agent to work more under the program you said would discourage work in part (c) than in the other program. Describe what seems extreme about these curves that lead to unusual behavior.

Solutions

Expert Solution

Leisure is inferior good and as income rises the consumes less of the same.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Consider an income guarantee program with an income guarantee of $5,000 and a benefit reduction rate...
Consider an income guarantee program with an income guarantee of $5,000 and a benefit reduction rate of 40%. A person can work up to 2,000 hours per year at $10 per hour. 1. Draw the person’s budget constraint with the income guarantee. Be sure to place appropriate labels similar to those found in the slides/lecture. (5 pts.) 2. Suppose that the income guarantee rises to $7,500 but with a 60% reduction rate. Draw the new budget constraint. Make sure it...
Consider an income guarantee program with an income guarantee of $3,000 and a benefit reduction rate...
Consider an income guarantee program with an income guarantee of $3,000 and a benefit reduction rate of 50%. (The benefit is reduced by $0.50 for every dollar of labor income.) A person can work up to 2,000 hours per year at $6 per hour. Person A, Person B, and Person C work for 100, 333 1/3, and 400 hours, respectively, under this program. a. Draw the budget constraint facing any worker under the original program b. Suppose the benefit is...
FOR DEVELOPING COUNTRIES, GROWTH DOES NOT GUARANTEE POVERTY REDUCTION; WHILE HIGHER INCOME IS CLEARLY ASSOCIATED WITH...
FOR DEVELOPING COUNTRIES, GROWTH DOES NOT GUARANTEE POVERTY REDUCTION; WHILE HIGHER INCOME IS CLEARLY ASSOCIATED WITH LESS POVERTY, ECONOMIES CAN EVEN REACH UPPER MIDDLE-INCOME STATUS BUT CONTINUE TO STRUGGLE WITH LESS POVERTY, ECONOMIES CAN EVEN REACH UPPER MIDDLE-INCOME STATUS BUT CONTINUE TO STRUGGLE WITH A QUITE HIGH INCIDENCE OF EXTREME POVERTY. WHAT DOES IT RELATE TO ON THE IMPORTANCE OF THE CHARACTER OF A NATION'S GROWTH PROCESS AND ITS INSTITUTIONAL STRUCTURE?
For 2 - 8 Given: Treatment E: Cost = $5,000, benefit = survival rate of 60%...
For 2 - 8 Given: Treatment E: Cost = $5,000, benefit = survival rate of 60% Treatment F: Cost = $7,000, benefit = survival rate of 50% Treatment G: Cost = $4,000, benefit = survival rate of 40% Treatment H: Cost =$5,000, benefit = survival rate of 30% Treatment K: Cost =$3,000, benefit = survival rate of 55% Treatment J: Cost = $6,000, benefit = survival rate of 68% 2. Treatment E obviously dominates _________________ A. Treatment H only B....
Given: Treatment E: Cost = $5,000, benefit = survival rate of 60% Treatment F: Cost =...
Given: Treatment E: Cost = $5,000, benefit = survival rate of 60% Treatment F: Cost = $7,000, benefit = survival rate of 50% Treatment G: Cost = $4,000, benefit = survival rate of 40% Treatment H: Cost =$5,000, benefit = survival rate of 30% Treatment K: Cost =$3,000, benefit = survival rate of 55% Treatment J: Cost = $6,000, benefit = survival rate of 68% 1. What are the ICERS of K to E? K to J? $272.73; $23,076.92 $40,000;...
Consider an economy with a real income of $7,000, consumption spending of $5,000, and net tax...
Consider an economy with a real income of $7,000, consumption spending of $5,000, and net tax revenue of $1,000. a. Calculate domestic private saving b. Suppose government spending is $1,000. Calculate public saving. c. Continuing from part b, what is national saving? d. Continuing from part c, suppose net foreign investment is -$2,000. What is private domestic investment spending?
Consider the impacts on long-run growth from a reduction in the savings rate. Provide a graph...
Consider the impacts on long-run growth from a reduction in the savings rate. Provide a graph that clearly illustrates the effects along with a brief discussion. Be sure to mention the effects on the long-run growth rate.
The amount of the monthly income benefit a policyowner receives under a disability income benefit is...
The amount of the monthly income benefit a policyowner receives under a disability income benefit is typically expressed as a percentage of the life insurance coverage flat amount, regardless of the amount of life insurance coverage percentage of the insured’s monthly income from his occupation dollar amount per $1,000 of life insurance coverage
Consider a small open economy that maintains a fixed exchange rate. Explain what effects a reduction...
Consider a small open economy that maintains a fixed exchange rate. Explain what effects a reduction in the interest rate that prevails in world financial markets would have on each of the following domestic variables after the economy has adjusted to a new equilibrium: (i) Real GDP (ii) Domestic interest rate (iii) Central bank’s stock of foreign exchange reserves (iv) Real exchange rate (v) Current and non-reserve financial accounts of the balance of payments
Consider the following two projects both costing $5,000. Assume the prevailing interest rate is 4%.      ...
Consider the following two projects both costing $5,000. Assume the prevailing interest rate is 4%.       Project 1 pays $1,000 for 50 years.       Project 2 pays $900 forever. Use Solver to find the interest rate at which an investor would be indifferent between the two projects. Please use an Excel spreadsheet and save the Solver solution. That way, the grader can open the Solver window and check the parameter values you entered into Solver. (Hint: One way to ensure...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT