CAIE A-Level Economics 8.2.4 Poverty Trap

Practise identifying when extra earnings are offset by higher tax and withdrawn means-tested benefits and evaluating tax-free allowances or wage changes as ways to restore…

Exam points

trace an earnings rise through extra income tax and withdrawal of means-tested benefits
identify a high effective marginal tax rate when disposable income barely rises with earnings
evaluate larger tax-free allowances, slower benefit withdrawal or higher real minimum wages

[Maximum number: 1]

Which policy is most likely to contribute to people ending up in a poverty trap?

legal minimum wage

means-tested benefits

prevention of cheaper imports

proportional taxation

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8.2.4—Poverty trap question 1