Question 1

Which of the following statements concerning the work incentive (or disincentive) effects under a wage subsidy program and under a negative income tax program is true?

Accepted Answer

The wage subsidy program directly increases the return on each hour worked, thus providing a stronger incentive to work compared to a negative income tax program, which offers financial support that decreases as income rises, potentially creating a disincentive to work as individuals may lose benefits as they earn more.

Question 2

In the treatment group, at the outset of the program, the proportion of welfare recipients working full-time was 6 percent, after one year, 30 percent of the program group was working full time.
In the control group, at the outset of the program, the proportion of welfare recipients working full-time was 6 percent, after one year, 15 percent of the program group was working full time.
-Based on Reference 03-02, we can estimate that the impact of the program on labour market participation is:

Accepted Answer

The impact of the program is the difference in the increase in full-time employment between the treatment and control groups: 30% - 15% = 15%.

Question 3

The difference between a conventional welfare program and a negative income tax program is that:

Accepted Answer

The negative income tax program is designed to ensure that recipients receive a guaranteed income that exceeds what they pay in taxes, effectively providing financial support without requiring repayment or work for each hour.

Question 4

The following diagrams of budget constraints pertain to the next three questions. The vertical axis is Income and the horizontal axis is Leisure.
  
-Which of the diagrams of budget constraints above depicts the Wage Subsidy program?

Accepted Answer

A wage subsidy program effectively increases the income of workers for the same amount of labor, shifting the budget constraint outward in a way that increases the slope, indicating that each hour of work now yields more income. This is depicted in option B, where the budget constraint shifts outward in a manner that reflects an increase in the effective wage rate, allowing for more consumption at each level of labor supplied compared to the initial budget constraint.

Question 5

Another term for a guaranteed annual income plan is:

Accepted Answer

The answer of Another term for a guaranteed annual income...

Question 6

If a social benefit is universal, then which of the following is true?

Accepted Answer

The answer of If a social benefit is universal, then...

Question 7

What is the effect of a demogrant on the budget contraint?

Accepted Answer

A demogrant is a lump-sum payment to individuals, which effectively increases their income without affecting the relative prices of goods. This increase in income shifts the budget line outward, allowing individuals to potentially consume more of both goods without changing the slope of the budget line.

Question 8

The following diagrams of budget constraints pertain to the next three questions. The vertical axis is Income and the horizontal axis is Leisure.
   
-Which of the diagrams of budget constraints above depicts the Earned Income Tax Credit program?

Accepted Answer

The Earned Income Tax Credit program is a refundable tax credit for low- and moderate-income working individuals and families. The credit is designed to offset the payroll taxes that these individuals pay, and it can result in a refund even if the individual does not owe any income tax. The diagram of the budget constraint that depicts the Earned Income Tax Credit program is the one that shows a kink in the budget constraint at the point where the individual's income reaches the threshold for the credit. This kink represents the fact that the credit provides a subsidy to individuals who earn below the threshold, and this subsidy results in a higher after-tax income for these individuals.

Question 9

For which of the following programs does the recipient receive a supplement from the government for each hour worked?

Accepted Answer

A wage subsidy program directly supplements the income of workers for each hour worked, encouraging employment and increasing the take-home pay of workers.

Question 10

Which of the following programs is superior in terms of its ability to direct payments to those individuals or families in greatest need of assistance?

Accepted Answer

Social assistance or welfare programs are specifically designed to target and provide financial support to individuals or families in greatest need, often based on income levels, disabilities, or other criteria that indicate significant need.

Question 11

What is the approximate rate at which lost earnings are replaced by Canada's unemployment insurance system?

Accepted Answer

Canada's unemployment insurance system typically replaces 55% of earnings up to a certain threshold, with no replacement for wages above that level.

Question 12

Which of the following factors may affect the welfare participation rate?

Accepted Answer

All of the listed factors can affect the welfare participation rate. The political views of the party in power can influence welfare policy and accessibility. The level of basic benefits can make welfare more or less attractive to potential recipients. The unemployment rate can affect the number of people seeking welfare assistance. Finally, the total number of caseloads can reflect the system's capacity and efficiency, influencing participation rates.

Question 13

The reason for which worker's disability insurance can potentially have adverse effects on work incentives is that:

Accepted Answer

Disability insurance can reduce work incentives because it provides income without requiring work, potentially making leisure more attractive than working.

Question 14

All of the following describe a demogrant except:

Accepted Answer

A demogrant is typically a uniform amount provided to a specific demographic group, not varying with the worker's wage, which is what makes option C incorrect.

Question 15

All of the following government programs are types of income maintenance programs except:

Accepted Answer

The answer of All of the following government programs are...

Question 16

All of the following are sources of concern with income maintenance programs except that:

Accepted Answer

The answer of All of the following are sources of...

Question 17

What does the term negative refer to in a negative income tax scheme?

Accepted Answer

In a negative income tax scheme, individuals earning below a certain threshold receive a subsidy or a credit from the government instead of paying taxes, effectively providing income support directly through the tax system.

Question 18

Since 1990, the welfare benefit rate in Ontario has shown:

Accepted Answer

Since 1990, the welfare benefit rate in Ontario has generally shown a decreasing trend, especially when considering the rates adjusted for inflation.

Question 19

The following diagrams of budget constraints pertain to the next three questions. The vertical axis is Income and the horizontal axis is Leisure.
  
-Which of the diagrams of budget constraints above depicts the Negative Income Tax program?

Accepted Answer

The Negative Income Tax (NIT) program is characterized by a budget constraint that has a distinct kink, reflecting a basic income guarantee up to a certain point, after which additional income is taxed away, reducing the effective income. Diagram C typically represents this by showing an initial steeper slope (indicating the income guarantee with no work requirement) that flattens (indicating the phase where additional earnings reduce the benefit) as income increases, which is consistent with the NIT structure.

Question 20

As American economic condition worsens in 2008, we can expect all following changes, except:

Accepted Answer

The basic benefit of welfare typically does not automatically increase due to an economic downturn. Adjustments to welfare benefits are usually made through legislative action and are not directly tied to economic conditions like unemployment or job vacancy rates.

Quiz 3: Labour Supply and Public Policy: Work Incentive Effects of Alternative Income Maintenance Schemes