Midterm 1 Answer key
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Instructions: you can use a calculator. Please read the questions CAREFULLY!
1 Part B (20 points): Short Answers
Question 1 (10 pts)
You can use the reverse of this page to answer. Please, answer as completely as possible.
Suppose the Social Security disability insurance (DI) program was structured so that otherwise
eligible recipients lost their entire disability benefit if they had any labor market earnings at all.
Suppose, too, that Congress was concerned about the work disincentives inherent in this
program, and that the relevant committee was studying two alternatives for increasing work
incentives among those disabled enough to qualify for it. One alternative was to reduce the
benefits paid to all DI recipients but make no other changes in the program. The other was to \