Question

Suppose that currently the government provides everyone with a guaranteed income of $12,000 per year, but this benefit level is reduced by $1 for each $1 of work income. the government is considering changing this policy so that the benefit level is reduced by $1 for every $2 of work income. what effect would this policy have on work effort? explain your answer

Answer 1

Theoretically it should improve work effort by 100% if applicable because people can make double their money with the same penalization that was instated previously.