In terms of capital budgeting, explain the difference between risk and uncertainty
What will be an ideal response?
Uncertainty involves possible future events to which no probability values can be assigned, while risk involves such events to which probabilities can be attached to their outcome. Thus, risk adjustments can be made to expected cash flow values and/or opportunity cost rates of discount. With uncertainty, no such adjustments can be made.
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Assume that the supply curve for a commodity shifts to the right and the demand curve shifts to the left, and the shift in demand is greater than the shift in supply
Then, in comparison to the initial equilibrium, the new equilibrium will be characterized by: A) a lower price and a higher quantity. B) the same price and a lower quantity. C) a higher price and a lower quantity. D) a lower price and quantity.
When banks make new loans, the effect on reserves is the same as
A) holding excess reserves. B) expanding capital. C) purchasing securities. D) acquiring deposits.