Compared with a Low Benefit Reduction Rate, a Relatively High

question 179

Multiple Choice

Compared with a low benefit reduction rate, a relatively high benefit reduction rate in a cash assistance program

• A) reduces the incentive to work.
• B) increases the incentive to work.
• C) does not affect the incentive to work.
• D) will reduce the incentive to work through the substitution effect but will increase the incentive to work through the income effect.

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Definitions:

Direct Tax

is a type of tax directly imposed on individuals or entities, such as income tax and property tax, which cannot be passed onto others.

Payroll Tax

Charges levied on both employers and employees, typically based on a proportion of the wages that businesses distribute to their workers.

Wage Base

The maximum amount of earnings that is subjected to certain taxes, such as Social Security taxes, within a given time period.

Excise Tax

A tax charged on specific goods and services, such as alcohol and tobacco, usually to discourage their use or generate revenue.