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?

Question

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?

Quizplus · 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.

The Following Diagrams of Budget Constraints Pertain to the Next