1 A Verbally describe the Earned Income Tax Credit (EITC) How does one gain from the EITC B Explain vertical equity in income redistribution Explain how the EITC sometimes violated vertical equity in income redistribution C Draw a labor leisure diagram, following the 80 hour per week convention Budget Line 1 No EITC Only wage income Budget Line 2 Both EITC and wage income are paid Label fully Use indifference curves to show a person who chooses to work more hours per week on budget line 2 than on budget line 1 Is this the income effect or is it the substitution effect more strongly causing the choice to work more hours Explain the results Answer all parts

Question

1  A  Verbally describe the Earned Income Tax Credit (EITC)   How does one gain from the EITC  B  Explain vertical equity in income redistribution  Explain how the EITC sometimes violated vertical equity in income redistribution  C  Draw a labor leisure diagram, following the 80 hour per week convention  Budget Line 1   No EITC  Only wage income  Budget Line 2   Both EITC and wage income are paid  Label fully  Use indifference curves to show a person who chooses to work more hours per week on budget line 2 than on budget line 1  Is this the income effect or is it the substitution effect more strongly causing the choice to work more hours  Explain the results  Answer all parts

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1. A. Verbally describe the Earned Income Tax Credit (EITC).. How does one gain from the EITC? B. Explain vertical equity in income redistribution. Explain

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