Which of the following methods have been used to reduce the disincentive effects of welfare on labor supply?
I. The government reduces welfare benefits by $1 of every $1 of labor income earned.
II. The government limits the amount of time that someone can collect welfare.
III. The government provides an Earned Income Tax Credit that supplements the income of the working poor.
A) I and III only
B) II and III only
C) II only
D) I, II, and III

Question

Quizplus · Accepted Answer

Option I would keep the disincentive effects of welfare on labor supply, whereas options II and III are effective methods to reduce them. Option II sets a limit to the time period for which an individual can receive welfare, which encourages people to work and become self-sufficient. Option III provides working families with a tax credit that supplements their income, making it easier to transition off of welfare.

Which of the Following Methods Have Been Used to Reduce