The U.S. tax code allows taxpayers to deduct the value of ...

[APUS57]

The U.S. tax code allows taxpayers to deduct the value of charitable contributions from their taxable income.
 
  Explain if this is an example of an incentive, and what effect this policy is likely to have on the amount of charitable contributions in the United States.

Question 2

Refer to Figure 7.1. The benevolent social planner would want the outcome represented in the ________ box.
 
  A) upper left
  B) upper right
  C) lower left
  D) either A or C

[duke02]

Answer to Question 1

This is an example of an incentive because it is an inducement to give to charitable organizations. This is likely to increase the amount of charitable contributions compared to what they would be without this tax deduction.

Answer to Question 2

D

[APUS57]

TYSM

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