Which term describes the sharp reduction or loss of public benefits that can occur with a modest increase in income?

• A. Welfare trap
• B. Benefit cliffs
• C. Poverty line
• D. Inflation spike

Answer: (A)

When public benefits are means-tested, they’re often phased out as income rises. a small increase in earnings can trigger a sharp loss of several benefits, leaving your total resources the same or even lower. That drop as you earn more is what the term welfare trap captures—the idea that moving up can feel like stepping into a trap where benefits disappear faster than earnings grow, discouraging work or higher income. The other options don’t fit this dynamic: the poverty line is just a fixed threshold for defining poverty, and an inflation spike relates to prices, not benefit changes with income. Benefit cliffs describe the abrupt loss of benefits, but the label welfare trap is the commonly used way to express the broader discourage-work effect from those benefit reductions.