## (Solved) EITC Assume that the structure of EITC is as follows: During the phase in range, EITC recipients receive an additional 15% of their income for each...

EITC

Assume that the structure of EITC is as follows:

1.Â Â Â Â Â Â During the phase in range, EITC recipients receive an additional 15% of their income for each dollar earned up to a maximum of a \$3,000 credit limit.

2.Â Â Â Â Â Â They can earn this \$3,000 credit until the phase out range, which begins when they start earning \$30,000 or more.

3.Â Â Â Â Â Â During the phase-out range, the credit reduces by 10% until it reaches \$0

A.Â Â Â Â Â Graph the structure of the EITC with income on the X-axis and the EITC credit on the Y-axis. Clearly label all relevant points on the graph, including the maximum credit, earnings when the credit reaches \$0, and earnings at the end of the phase in range and at the beginning and end of the phase out range.

B.Â Â Â Â Â Now assume a worker earns \$2,000 per week if she works and can work up to 50 weeks a year. Plot a budget constraint for consumption (Y) on the Y axis and hours of Leisure (L) on the X-axis assuming that EITC does not exist.

C.Â Â Â Â Â Now, on the same graph, draw her budget constraint assuming EITC exists.

Be sure to label on both the Y and X axes the values for each part of EITC. That is, at how many weeks of work does the phase-in end: what will our worker earn? At how many weeks of work does the phase-out begin and end; how mch does our worker earn at each point?

EITC Structure Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Consumption/Leisure

EITC
Assume that the structure of EITC is as follows:
1. During the phase in range, EITC recipients receive an additional 15% of their income for
each dollar earned up to a maximum of a \$3,000 credit limit.
2. They can earn this \$3,000 credit until the phase out range, which begins when they start
earning \$30,000 or more.
3. During the phase-out range, the credit reduces by 10% until it reaches \$0
A. Graph the structure of the EITC with income on the X-axis and the EITC credit on
the Y-axis. Clearly label all relevant points on the graph, including the maximum
credit, earnings when the credit reaches \$0, and earnings at the end of the
phase in range and at the beginning and end of the phase out range.
B. Now assume a worker earns \$2,000 per week if she works and can work up to 50
weeks a year. Plot a budget constraint for consumption (Y) on the Y axis and
hours of Leisure (L) on the X-axis assuming that EITC does not exist.
C. Now, on the same graph, draw her budget constraint assuming EITC exists.
Be sure to label on both the Y and X axes the values for each part of EITC. That is,
at how many weeks of work does the phase-in end: what will our worker earn?
At how many weeks of work does the phase-out begin and end; how mch does
our worker earn at each point? EITC Structure Consumption/Leisure

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This question was answered on: Sep 05, 2019

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Sep 05, 2019

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