Social Problems Practice Test

Social policy can reduce poverty by directly increasing the resources available to people with low incomes and by shaping incentives that help people move into and stay in work. An example is the Earned Income Tax Credit, a refundable credit for low- and moderate-income workers. It adds to take-home pay even if you don’t owe much in taxes, so it effectively raises the income of working families. By boosting after-tax earnings, it can lift some people above the poverty line and reduce the depth of poverty, while also encouraging work because the benefit grows with earnings up to a point. This concrete instrument shows how policy can translate into real financial gains for those most in need. Other options either deny policy impact or describe more limited or inaccurate effects, whereas the EITC illustrates a clear, work-incentivizing pathway policy uses to address poverty.