The Topping- Up Mechanism

question 36

Multiple Choice

The topping- up mechanism:

• A)does not offer any perverse incentives.
• B)is similar with the negative income tax.
• C)can function in the most general set of circumstances.
• D)encourages potential recipients to give up work.

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Definitions:

Cash Outflows

Money that is spent or transferred out of a business, project, or venture.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production costs.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance.

Incremental Cash Flow

The additional cash flow from taking on a new project, calculated as the difference between the project's cash flows if the project is taken versus if it is not.