Question

What impact do transfer payments have?

O they reduce the incentive to work and shift as to the right
O they reduce the incentive to work and shift as to the left
O they increase the incentive to work and shift as to the right
O they increase the incentive to work and shift as to the left

Answer 1

Transfer payments can reduce the incentive to work and shift the budget line to the right. Therefore correct option is A

Step-by-step explanation:

Transfer payments can impact the incentive to work and can shift the budget line. When transfer payments are implemented, some individuals may choose to work fewer hours while still earning more income, shifting their choice on the budget line to a point above and to the right of their original choice. This means that for some people, transfer payments may reduce the incentive to work and shift their choice to the right on the budget line.

Therefore, the correct answer to the question is: They reduce the incentive to work and shift as to the right.