Consider an income guarantee program

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Q1. Consider an income guarantee program with an income guarantee of $6,000 and a benefit reduction rate of 50%. A person can work up to 2,000 hours per year at $10 per hour.

A. Draw the person's budget constraint without the income guarantee.

B. Draw the person's budget constraint with the income guarantee.

C. Assume the income guarantee rises to $9,000 but with a 100% reduction rate. Draw the new budget constraint.

Q2. The May unemployment figures were released Friday, and at 8.2%, unemployment had increased by .1%, and new jobs were less than half of the projected number. What impact will this have on the U.S. economy?

Reference no: EM138689


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