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Chapter 15: Q.31 (page 378)
If a family of three earned $20,000, would they
be able to make ends meet given the official poverty threshold?
Family of three would hardly be able to survive on an earning of $20,000.
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If a country had perfect income equality what
would the Lorenz curve look like?
Many critics of government programs to help low-
income individuals argue that these programs create a poverty trap. Explain how programs such as TANF, EITC, SNAP, and Medicaid will affect low-income and whether or not you think these programs will benefit families and children.
We have discovered that the welfare system discourages recipients from working because the more income they earn, the less welfare benefits they receive. How does the earned income tax credit attempt to loosen the poverty trap?
Imagine that the government reworks the welfare policy that was affecting Jonathan in question 1, so that for each dollar someone like Jonathan earns at work, his government benefits diminish by only 30 cents. Reconstruct the table
from question 1 to account for this change in policy. Draw Jonathan鈥檚 labor-leisure opportunity sets, both for before
this welfare program is enacted and after it is enacted.
This problem uses the analogy of a 鈥渓eaky bucket鈥� to explain one constraint on the redistribution of income.
a. What elements of the U.S. system for redistributing income create the leaks in the bucket? Be specific.
b. Between Republicans and Democrats, who do you think generally believes that the bucket used for redistributing income is leaky? How does that belief affect their views about the amount of income redistribution that the government should undertake?
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