An individual faces two alternatives for an investment. Asset 'A' has the following probability of return schedule:Probability of returnReturn (Yield) %.2515.0.2012.0.2010.0.159.0.107.5.100.0Asset 'B' has a certain return of 10.25%. If this individual selects asset 'A' does it imply she is risk averse? Explain.
What will be an ideal response?
Since both assets provide the same expected return, they would be equally attractive to an investor who is risk neutral. An investor who is risk averse would prefer Asset B, which provides the same expected return but with less risk than Asset A.
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If the United States decides to allocate more resources to capital goods and less to consumer goods, the United States will obtain a greater degree of:
A) economic growth. B) full employment. C) price stability. D) technical efficiency.
Economists who believe the supply-side effects of tax cuts are small essentially believe that
A) tax cuts mainly affect aggregate demand. B) tax cuts will result in relatively small changes in the price level. C) tax cuts mainly affect aggregate supply. D) tax cuts will increase the quantity of labor supplied.