Why is a bond considered to be a loan but a share of stock is not?
What will be an ideal response?
A bond is a loan because the firm promises to pay back the principal and interest to the bondholder. Rather than a loan, a share of stock is the purchase of part ownership of the company itself. The firm isn't obliged to return the investor's funds at any particular date; instead, the investor owns a share of the firm's assets and has a claim on the firm's profits.
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If an increase in the price of good X leads to a decrease in the demand for good Y, then:
A. good X is a normal good and good Y is an inferior good. B. good X and good Y are complements. C. good X and good Y are normal goods. D. good X and good Y are substitutes.
The ratchet effect means that:
A. when aggregate demand increases, the price level remains constant. B. when aggregate supply decreases, the price level increases. C. when aggregate supply increases, the price level decreases. D. when aggregate demand decreases, the price level remains constant.