Consider a Negative Income Tax

Essay

Consider a negative income tax.As discussed in your textbook,under the negative income tax,each person is entitled to a grant of G dollars per month.For every dollar the person earns,the grant is reduced by t dollars.Suppose G = 200 and t = 0.40.Consider an individual whose hourly wage is $10.There are 30 days in a month (so T is 720).Sketch the budget constraint before and after the introduction of a negative income tax.