Why are bonds risky to a corporation?
What will be an ideal response?
When a company issues new bonds, it commits itself to pay out the coupon amount every year of the bond’s life, whether business is booming or the firm is losing money. If the firm is unable to meet its obligation to bondholders in some year, bankruptcy may result. Stocks do not burden the company with any such risk because the firm does not promise to pay stockholders any fixed amount.
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If MPC = 0.8 and the economy is in equilibrium $500 below full-employment equilibrium, how much should government spending change to achieve full employment?
a. ?100. b. +80. c. ?80. d. +500. e. +100.
In economic terms, the total price of a pound of meat for an individual who has waited in line is
A. the money price of the meat plus the opportunity cost of time spent waiting in line. B. the money price of meat relative to the price of bread or other necessity. C. the money price of an equal amount of meat substitute, such as beans and rice. D. the money price paid to the butcher for the pound of meat.
Which of the following is consistent with the classical position on wages and prices?
A) Wages and prices are inflexible in the downward direction, but not in the upward direction. B) Wages are inflexible in the downward direction, but prices are flexible. C) Wages and prices are flexible. D) Prices are inflexible in the downward direction, but wages are flexible.
In order to increase the supply of a good, producers must
A) convince consumers to reduce the quantity demanded. B) see an increase in quantity supplied by competitors. C) reduce their per-unit costs of producing the good. D) cut back on labor to reduce production costs.