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Suppose the Current Welfare System Is Completely Eliminated and Replaced

Question 92

Multiple Choice

Suppose the current welfare system is completely eliminated and replaced with a negative income tax.The tax credit granted to everyone is $10,000 and the tax on earnings is 25%.
-Refer to the above information.Under the negative income tax,each extra dollar earned causes total income to


A) remain constant.
B) fall by 25 cents.
C) rise by 25 cents.
D) rise by 75 cents.
E) rise or fall;it depends on whether one is above or below the breakeven level of income.

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