The greatest advantage of a negative income tax is that it ?
Correct answer: A. generates a smaller disincentive to work than most alternative anti-poverty policies.
- A. generates a smaller disincentive to work than most alternative anti-poverty policies.
- B. reduces the cost to the government of fighting poverty
- C. would not provide benefits to lazy people
- D. ensures that the poor actually receive what the government thinks they need does all these answers.
Explanation
A negative income tax supports low-income households through cash transfers while preserving some return from earning additional income, so its work disincentive can be smaller than under many alternatives. It does not eliminate all disincentives or exclude people deemed lazy.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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