One of the implications of the poverty trap is that

Question

Quizplus · Accepted Answer

The poverty trap refers to the situation where individuals or households are caught in a cycle of poverty due to various factors, including a high effective marginal tax rate. When low-skilled workers earn more, they may lose certain benefits, such as welfare or housing assistance, which can result in a high effective marginal tax rate. This high tax rate can discourage the labour supply as workers may not see any significant increase in their take-home pay. Therefore, choice A is the best answer as it correctly identifies the negative effect of a high effective marginal tax rate on the labour supply.

One of the Implications of the Poverty Trap Is That