Suppose that a state were to cut the welfare guarantee from $6,000 to $3,000 between 2012 and 2014.Furthermore,suppose that hours of work per year among single mothers rose from 900 to 1,200 hours/year.Using the time series approach,what is the effect of the reduction for the average single mother?

Question

Quizplus · Accepted Answer

According to the time series approach, we should compare the change in welfare guarantee with the change in hours of work per year among single mothers. The reduction in welfare guarantee is given as a percentage of the initial value: (6,000 - 3,000) / 6,000 = -50%. The increase in hours of work is given as a percentage of the initial value: (1,200 - 900) / 900 = 33.3%. To calculate the effect of the reduction on the average single mother, we multiply these two percentages: -50% * 33.3% = -16.7%. This means that the reduction in welfare guarantee is associated with a decrease in hours of work by 16.7% of the initial value, or 300 hours/year (900 * 0.167 ≈ 150; 150 * 2 = 300). Therefore, the best answer is B, 300 hours/year.

Suppose That a State Were to Cut the Welfare Guarantee