The budget line below reveals the labor-leisure choices for a wage earner. The guaranteed income is with 50% benefit reduction.

How does the 50% benefit reduction (as opposed to 100%) decrease the problem of wage earners at lower income levels dramatically decreasing their hours worked (decreasing the moral hazard problem)?

In what way does the 50% benefit reduction increase the range of income earners who could possibly decrease their work hours (increasing the moral hazard problem)?

What is the economic argument for offering cash (such as the EITC) versus in-kind benefits (such as SNAP) to recipients?

Figure 4 $ of consumption per year A 25,000- zi 18,000 Bil slope -wage -12.50 22 slope net wage -6.25 Y2 X G = 9,000 B 560 1,280 2,000 Hours of leisure per year Figure 4 $ of consumption per year A 25,000- zi 18,000 Bil slope -wage -12.50 22 slope net wage -6.25 Y2 X G = 9,000 B 560 1,280 2,000 Hours of leisure per year