Figure 21-1

In Figure 21-1, a reform in the distribution system that achieves the same distribution with less damage to work incentives is represented by a move from which points?

Question

Figure 21-1

In Figure 21-1, a reform in the distribution system that achieves the same distribution with less damage to work incentives is represented by a move from which points?

Quizplus · Accepted Answer

The reform that achieves the same distribution with less damage to work incentives is represented by a move from point C to point F, which is a shift from a high tax rate/high benefit system to a low tax rate/low benefit system. Points A to B represent a pure tax cut, which would not necessarily improve work incentives, and point B to C represents a shift towards a high tax rate/high benefit system, which would likely disincentivize work. Point C to G represents a shift towards a high benefit/low tax rate system, which could also disincentivize work.

Figure 21-1 In Figure 21-1, a Reform in the Distribution System That