A decline in the corporate income tax will ________ and the firm will ________.

Question

Quizplus · Accepted Answer

A decline in the corporate income tax will lower the capital user cost (the cost of using capital for production) and therefore encourage firms to invest in more capital. It does not necessarily put more money in the bank, increase corporate profits, offset higher capital gains by hiring more labor, lower the rate of capital depreciation, or raise the marginal product of capital.

A Decline in the Corporate Income Tax Will ________ and the Firm