Consider a Negative Income Tax

question 33

Essay

Consider a negative income tax.As discussed in your textbook,under the negative income tax,each person is entitled to a grant of G dollars per month.For every dollar the person earns,the grant is reduced by t dollars.Suppose G = 200 and t = 0.40.Consider an individual whose hourly wage is $10.There are 30 days in a month (so T is 720).Sketch the budget constraint before and after the introduction of a negative income tax.

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Definitions:

Check Register

A record book used to keep track of all the checks issued, deposits made, and current balance in a checking account.

Bank Statement

A summary of financial transactions that have occurred over a given period on a bank account.

Service Charge

A fee collected for services provided, often added to a bill in restaurants, hotels, or other service industries.

Interest

The cost of borrowing money or the return earned on an investment, expressed as a percentage of the principal.