Why do corporations want to keep the price of their stock high?
A) A higher stock price increases the funds the firm can raise when it sells a given amount of stock.
B) Corporations can pay their managers lower salaries and avoid principal-agent problems when stock prices are higher.
C) Higher stock prices are correlated with lower expected profitability.
D) All of the above provide incentive for corporations to keep the price of their stock high.
Answer: A
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A sunk cost has no effect on supply because it
A) applies to all suppliers. B) can be passed on to consumers. C) cannot be avoided by not supplying. D) cannot be passed on to consumers. E) did not have to be incurred in order for the good to be supplied.
Which activity of the Fed would tend to increase the nation's money supply?
A) Sales of government bonds B) Lowering the discount rate C) Raising the required reserve ratio D) None of the above.