The Following Questions Refer to the information given below.
Suppose the government implements a negative income tax plan to deal with the poverty problem.The negative income tax rate is set at 50%,and the break-even level of income is set at $5,000.
-If a family earns $3,000 income,their disposable income is
A)$3,000
B)$4,000
C)$5,000
D)$6,000
E)$8,000

Question

Quizplus · Accepted Answer

The negative income tax plan means that if a family's income falls below the break-even level, they will receive a payment equal to 50% of the difference between their income and the break-even level. 
In this case, the family's income is $3,000, which is $2,000 below the break-even level of $5,000. 
So the payment they will receive is 50% of $2,000, which is $1,000. 
Therefore, their disposable income will be their original income plus the payment, which is $3,000 + $1,000 = $4,000.

The Following Questions Refer to the Information Given Below