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27-06-2024
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If a social welfare program is adjusted to decrease benefits with increased earnings, but at a rate less than one-to-one, what happens to the recipient’s effective marginal tax rate on additional earnings?

a. It increases, discouraging additional work
b. It decreases, encouraging additional work
c. It stays the same, neutral on work incentives
d. It becomes negative, implying a subsidy on additional earnings

Answer :

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