Chapter 15: Q. 15 (page 377)
What is the poverty line?
The poverty line marks the level of income required for attending the subsistence level of living. People earning income less than that or lying below the poverty line, are considered to be in a state of poverty.
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Jonathon is a single father with one child. He can work as a server for \(6 per hour for up to 1,500 hours per year. He is eligible for welfare, and so if he does not earn any income, he will receive a total of \)10,000 per year. He can work and still receive government benefits, but for every \(1 of income, his welfare stipend is \)1 less. Create a table similar to Table 15.4 that shows Jonathan’s options. Use four columns, the first showing number of hours to work, the second showing his earnings from work, the third showing the government benefits he will receive, and the fourth column showing his total income (earnings + government support). Sketch a labor-leisure diagram of Jonathan’s opportunity set with and without government support.
Briefly explain the differences between TANF, the earned income tax credit, SNAP, and Medicaid.
What is the difference between poverty and income inequality?
Describe how a push for economic equality might reduce incentives to work and produce output. Then describe how a push for economic inequality might not have such effects.
Think about the business cycle: during a recession,
unemployment increases; it decreases in an
expansionary phase. Explain what happens to TANF, SNAP, and Medicaid programs at each phase of the business cycle (recession, trough, expansion, and peak).
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