Firms May React to a Payroll Tax by

question 116

Multiple Choice

Firms may react to a payroll tax by

• A) substituting labor for capital.
• B) increasing their output.
• C) shifting to more capital intensive techniques.
• D) increasing workers' wages.

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Definitions:

Mortgage-Backed Securities

Securities issued for the financing of large pools of mortgages. The promised returns to the security holders are derived from the mortgage interest payments.

Capital Requirement

The minimum amount of financial resources that a firm needs to conduct its business activities, often regulated in industries like banking.

Investment Banks

Financial institutions that assist individuals, corporations, and governments in raising capital by underwriting and/or acting as the client's agent in securities issuance.

Tax Deductibility

Refers to the ability to subtract an expense from one's taxable income, thereby reducing the overall tax liability.