A government program guarantees $18,000 in income, even for those who do not wor
ID: 1198879 • Letter: A
Question
A government program guarantees $18,000 in income, even for those who do not work at all. If the recipient earns income by working, then the $18,000 benefit is reduced by 50 cents for each $1 earned. Will this program eliminate the poverty trap?
Yes, enacting such a program will eliminate the poverty trap.
No, enacting such a program may still reduce the incentive to work.
Yes, and enacting such a program will cost the government less money.
Yes, enacting such a program will create adequate incentive to work.
Yes, enacting such a program will eliminate the poverty trap.
No, enacting such a program may still reduce the incentive to work.
Yes, and enacting such a program will cost the government less money.
Yes, enacting such a program will create adequate incentive to work.
Explanation / Answer
Poverty trap is a very worst form of poverty. If the people of the economy belong to poverty trap, then it is very difficult to come out of it. They do not have adequate money for consuming at minimum subsistence level. So a big push up is needed to push them out of this trap. When government guarantees $18,000 income, they will get minimum amount needed for survival. It will induce them to work more to improve standard further. Thus economy will improve and it will gradually come out of poverty trap.
Answer: Yes, enacting such a program will eliminate the poverty trap.