To explain:
The reasons for firms do not want to issue new shares of stock when consumers or businesses are negative about the economic conditions.
Explanation of Solution
The share prices are likely to fall when consumers or businesses are pessimistic about economic conditions. So,if there is a situation where consumers or businessmen are pessimistic, the firms should issue a larger number of stocks to raise some funds. Likewise, these firms are apt to spend in new capital or new expenditure when economic conditions are not in support of them.
Stock:
The ownership on a company's assets and earnings in form of share is known as stock. The person having share can claim ownership for that part.
Want to see more full solutions like this?
Chapter 13 Solutions
Bundle: Exploring Macroeconomics, Loose-leaf Version, 7th + LMS Integrated MindTap Economics, 1 term (6 months) Printed Access Card
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, IncPrinciples of Macroeconomics (MindTap Course List)EconomicsISBN:9781305971509Author:N. Gregory MankiwPublisher:Cengage LearningPrinciples of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning
- Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage LearningPrinciples of Macroeconomics (MindTap Course List)EconomicsISBN:9781285165912Author:N. Gregory MankiwPublisher:Cengage LearningEssentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning