Why might stockholders be upset to find out that their company's profits that otherwise would have been distributed as dividends are instead invested in U.S. Treasury bonds?
What will be an ideal response?
They would be upset because those same investors could have taken those profits and done the same thing with them on their own or better. The only instance when it would be appropriate for the company to retain the earnings is when the rate of return on the profit is likely to be higher than what investors could reasonably be expected to earn on their own had the profits been distributed as dividends instead.
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In the aggregate expenditures model, if aggregate expenditures (AE) are greater than GDP, then:
a. inventory is unchanged. b. inventory is accumulated. c. employment decreases. d. GDP increases.
Which of the following would cause an increase in the demand curve for oranges?
a. a freeze in Florida (a major orange producing state) b. a new machine that allows orange growers to harvest oranges faster c. a decrease in the price of apples d. an announcement by the FDA that oranges lowers cholesterol