Suppose all families of four,who earn nothing,are guaranteed a transfer payment of $20,000 and the government levies a negative tax rate of 20 percent.Calculate the income level below which all such families will receive some income benefits.

Question

Quizplus · Accepted Answer

The negative tax rate implies that for every dollar earned, the family loses 20% of the transfer payment. To find the income level below which families receive benefits, set the transfer payment to zero: $20,000 - 0.2 * Income = 0. Solving gives Income = $100,000.

Suppose All Families of Four,who Earn Nothing,are Guaranteed a Transfer