Question

. Louise works in a foreign branch of her employer's business. She earned $5,000 per month throughout the relevant period. Which of the following is correct:

a. If Louise worked in the foreign branch from May 1, 2014 until October 31, 2015, she may exclude $40,000 from gross income in 2014 and exclude $50,000 in 2015.
b. If Louise worked in the foreign branch from May 1, 2014 until October 31, 2015, she cannot exclude anything from gross income because she was not present in the country for 330 days in either year.
c. If Louise began work in the foreign country on May 1, 2014, she must work through November 30, 2015 in order to exclude $55,000 from gross income in 2015 but none in 2014.
d. Louise will not be allowed to exclude any foreign earned income because she made less than $100,800.
e. None of these.

Answer 1

Given the structure of this assistance program, Susan has diminished incentive to work because her total income remains constant at $16,000 regardless of her work hours up to a certain point. Additional opportunities like family time and career advancement lost due to working may also reduce her willingness to work more hours. The correct option is a.

Step-by-step explanation:

To analyze the impact of the assistance program on Susan's incentive to work, we need to create a table illustrating her possible hours of work, corresponding earnings, the decreased government benefits based on those earnings, and her total income. Below is a simplified version of such a table:

Number of Work HoursEarnings from WorkGovernment BenefitsTotal Income0$0$16,000$16,000500$4,000$12,000$16,0001,000$8,000$8,000$16,0001,800$14,400$1,600$16,000

As the table shows, regardless of how much Susan works, her total income will remain the same until her earnings from work exceed the government benefits. This situation likely decreases her incentive to work since additional hours worked do not increase her total income.

It also introduces opportunity costs such as time spent away from her children and potential career development, which may further reduce her work incentive. The correct option is a.