Answer
a) The labor supply will decrease.
b) The labor supply will increase.
c) One disadvantage of eliminating TANF is that TANF assists those who are less likely to be employed (or otherwise be in the labor market).
Work Step by Step
a) Since she earns an extra dollar, her benefits from TANF will decrease. Since her benefits will decrease, she will be overall worse off. Since she will be worse off, she will be less likely to work. Since she will be less likely to work, there will be less of a supply in labor.
b) Since people are made better off under the EITC, more people would be likely to work. This increase in the number of people willing to work would increase the labor supply.
