In: Economics
An Earned Income Tax Credit will
Select one:
A. create only an income effect.
B. increase the wage rate of some low-wage workers to a rate which is above the reservation wage.
C. increase the reservation wage of low-wage workers.
D. create only a substitution effect
The answer is: B). increase the wage rate of some low-wage workers to a rate which is above the reservation wage.
The Earned Income Tax Credit, EITC or EIC, is a benefit for
working people with low to moderate-income. To qualify, you must
meet certain requirements and file a tax return, even if you do not
owe any tax or are not required to file. EITC reduces the amount of
tax you owe and may give you a refund.