Question

1. "compared to the welfare program.Earned Income Tax Credit(EITC) RESULTS IN MORE WORK INCENTIVE"- DO YOU AGREE WITH THIS STATEMENT? JUSTIFY YOUR ANSWER USING GRAPH.

2. Unemployment Insurance Scheme is likely to increase the unemployment rate. why? use graph to explain.

Answer 1

howchoices in the bottom 3 quintiles of The eamed income tax creclit subsidize low income working families. The credit equals a fixed percentage of eamings from the first dollar of earnings until the credit beaches its maximum. The ETTC provides substantial support a low- andl. moderate income working parents but rery little support workers without qualitying children workers receine a reclit equal to a percentage of their earnings ap to a maxı mum credit. Both the coeclit rate and the merimum coeclit vary by family sizewith larger credits available to families with more children. Distribution obEITC Average Average torunits 2020 10011 Credit 4000 $350o $ 3 000 $ 2100 $ 2000 $ 1500 $ 100 o $ 75011 sol, 2511 with crealts. I share of tex units with credit lowest ou inte second middle Furks P Ali aninie auntle aminte oy: Th ETTC is concemed among the lowest eamers, with almost all of the credit going to the income olistribution. Each quintile contains 2017.07 the population ranked by howehold income.) very few houschelde in the fourth quinnile receire an Errc Crewer than 24). cs Scanned with CamScanner

lerer estimatry is going up unemply meet rate that came author can mecure the casual impact of extensions. Their empirical releet imply thee increue in the duration of tee winopen wage au o straigutforward to vsity that if the After the great recession find that unemployment insurance does inereare the unemployment rate beet thats becacere wordens remain in the labor force as they look for worc. unemply meet insurance is in the marro sense to see how it ab Ecos aggregate unemployment when the insurance is extended during recession Tu micro approach only captures what e conomist cou poctial equilibrium extects so unemploymentrate is changed after the extension at the marzo the general equilibrium effect. They get extended when anemploy rocet the benefits to trigger on when the underlyiy economic situation wouldn't call for it ar vice versa. The changes in this measurement error are random which means the unempuneet benefits inpeabd the curemply met rate by 003% nominal replacement sale increcues tu will have the biggest eftect on the generosity of UI in the low waje region. UI Berett Achalar. q Istaketung It is easy to see if there i wase green in high a wage resien ie whis pushed barther. Then thei) will lower the actual replacement rare. It is CS Scanned with CamScanner