For Someone Who Is Not Working at All Without the Earned

question 18

Multiple Choice

For someone who is not working at all without the Earned Income Tax Credit (EITC) ,which statement is true when the person is subject to the EITC,once he starts working?

• A) The income effect of the EITC induces the person to work more.
• B) The substitution effect of the EITC induces the person to work more.
• C) There is no substitution effect.
• D) There is no income effect.

---

Definitions:

Capacity to Control

The power to direct the financial and operating policies of an entity so as to obtain benefits from its activities.

Loan Contract

A legal agreement that specifies the terms under which one party lends money to another.

Parent-subsidiary Relationship

A corporate structure relationship where one company (the parent) controls another company (the subsidiary) by holding a majority of its stock.

Substantive Rights

Rights that the rights holder has the practical ability to exercise.