Question

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

a. If Louise worked in the foreign branch from May 1, 2013 until October 31, 2014, she may exclude $40,000 from gross income in 2013 and exclude $50,000 in 2014.
b. If Louise worked in the foreign branch from May 1, 2013 until October 31, 2014, 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, 2013, she must work through November 30, 2014 in order to exclude $55,000 from gross income in 2014 but none in 2013.
d. Louise will not be allowed to exclude any foreign earned income because she made less than $97,600.
e. None of these.

Answer 1

The table for Susan's income options shows that the government support program impacts her incentive to work, as it offers significant assistance that diminishes as she earns more.

Step-by-step explanation:

Understanding Susan's Work Decision Based on Government Support

Creating a table to understand Susan's financial choices can elucidate the impacts of the government assistance program on her incentive to work.

To construct the table, we would list a range of working hours from 0 to 2,000 in the first column.

The second column would show earnings from work calculated as the number of hours worked multiplied by $8 per hour.

The third column would show government support, which starts at $16,000 and is reduced by $1 for each $1 earned from work.

Finally, the fourth column is the total income, which is the sum of earnings from work and government support.

Through this analysis, we find that Susan's total income increases only when the earnings from work surpass the government benefit threshold.

As her earnings grow, government support diminishes until it reaches zero, after which all income is solely from work.

The impact on work incentives can be seen in the total income: If Susan earns equal to or less than the government benefits, she may have little motivation to work, as her total income does not significantly change.

Opportunity costs, such as time with children, transportation, or work-related expenses, also affect her decision to work more hours, potentially reducing her incentive to increase her labor supply.