Suppose the Representative Firm Suddenly Has Less Capital at Its

question 41

Multiple Choice

Suppose the representative firm suddenly has less capital at its disposal. What happens to labor demand?

• A) It increases.
• B) It stays the same.
• C) It decreases.
• D) We cannot tell.

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Definitions:

Retained Earnings

Profits that a company keeps or retains rather than distributing to shareholders in the form of dividends, typically used for reinvestment.

Retained Earnings

The portion of a company's profit kept in the business after dividends are paid, which can be used for reinvestment in operations, debt reduction, or other purposes.

Component Cost Of Preferred Stock

The required rate of return by investors on a company's preferred stock, essentially the cost to the company of issuing preferred stock.

Dividend Yield

The financial ratio that shows how much a company pays out in dividends each year relative to its stock price.