Draw a diagram similar to the work-leisure diagram of Figure 7.8.
a. Create a budget line for a person who receives a Negative Income Tax (NIT), at an initial low level of income. Label this line “Budget Line A.”
b. Create a second budget line, this time for a person who is instead eligible for the Earned Income Tax Credit (EITC). Label this line “Budget Line B.”
c. Which program, NIT or EITC, is more likely to encourage a person to work more hours and have fewer hours of leisure? Label and identify different parts of your diagram when you explain the workers, likely choices.

Figure 7.8

Transcribed Image Text:

Income per Day F C A 0 U₁ U₂ E₁ E₂ ليا G D 24 4 4 Leisure Hours per Day Transfer Payment B