By Law, Workers Pay Half the Social Security Tax and Employers

question 97

Multiple Choice

By law, workers pay half the Social Security tax and employers pay the other half. However, the price of labor (wages) does not adjust very quickly. If the government wanted to temporarily create a shortage of labor (or combat a surplus of labor) , what should it do?

• A) Move the whole tax onto workers (suppliers of labor).
• B) Move the whole tax onto employers (demanders of labor).
• C) Neither, because this change would have a long-run effect on who pays the Social Security tax.
• D) Increase the tax on both parties.

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Definitions:

Decreases

A reduction in the quantity, level, or intensity of something, such as expenses, assets, or liabilities.

Prepaid Insurance

An asset account that represents insurance payments made in advance for coverage extending beyond the current accounting period.

Accounts Payable

Amounts owed by a business to its suppliers shown as a liability on a company’s balance sheet and typically due within a short period of time, often 30 to 90 days.

Equipment

Tangible assets used in the operations of a business, not intended for sale, and depreciated over time.