Explain why some small start-up companies choose not to pay dividends even though they make very large profits. Why might investors still be happy with this arrangement?
What will be an ideal response?
Small start-up companies may choose to take the profit and use it to reinvest in the company rather than pay it out as dividends. This can be a cheaper way of borrowing financial capital versus borrowing from banks. Investors are likely to be happy with this arrangement is they believe that the company can make a higher rate of return on the profit than the investors could on their own in an alternative use.
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Explain how an economy which is presently above its balanced growth path will converge back to its balanced growth path?
What will be an ideal response?
Which of the following is a bank liability?
a. Required reserves. b. Excess reserves. c. Actual reserves. d. Checkable deposits. e. Loans.
Is the firm a perfect competitor or an imperfect competitor?
Based on the table demonstrating three tax systems, under which system(s) would a high earner pay an amount of tax closest to that paid by a low earner?
a. progressive
b. proportional
c. regressive
d. both proportional and progressive