A risk-averse investor will:
A. always prefer an investment with a certain return to one with the same expected return but that has any amount of uncertainty.
B. always require a certain return.
C. always focus exclusively on the expected return.
D. never prefer an investment with a lower expected return.
Answer: A
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Which of the following statements is true of government spending?
a. An increase in government spending raises the equilibrium level of income by a multiple of the original spending increase. b. Government spending is a part of monetary policy, not fiscal policy. c. A decline in government spending brings about an expansion in the economy. d. An increase in government spending increases the recessionary gap in the economy. e. An increase in government spending shifts the aggregate demand curve downward by a fraction of the rise in government spending.
The inflationary gap is the
a. inflation rate that will occur from excess aggregate demand. b. budget deficit that caused the inflation to occur. c. distance between the equilibrium level of output and the full employment level of output. d. gap between expected and actual inflation.