Recall from Chapter 13 that the earned income tax credit (EITC) provides a credit to lowincome individuals, with the size of the subsidy first increasing, and then decreasing, with the level of earnings. One pundit suggested a

“family-friendly” change in the tax law, under which the EITC would be replaced with a large increase in the child tax credit, which reduces tax liability a certain amount for each child in the household. Show how this change would affect the budget constraint facing a lowincome household. How would labor supply be affected?