For each of the following statements, state whether the statement is true, false, or uncertain and explain why
i. A risk neutral person is indifferent to a gamble and the expected value of the gamble.
ii. A risk-averse person will never accept a gamble.
iii. A risk-loving person will accept any gamble.
i. True, the expected utility of a gamble equals the utility of the expected value for a R.N. individual.
ii. False, a risk averse person will not accept a "fair" gamble (or worse) but *may* accept a gamble with a positive expected value.
iii. False, a risk loving individual will accept any fair gamble, but if the expected value is sufficiently negative, they will not accept the gamble.
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Uncovered interest parity refers to:
a. borrowing in the low-interest currency and lending in the high-interest currency without covering against a change in the exchange rates. b. foolish actions that usually are not successful. c. activities that are designed to raise or lower interest rates but are risky. d. the practice of depositing all of one's funds in one currency without regarding the pros and cons of such a transaction.
"In the loanable funds market, when there is a shortage of funds, the real interest rate will increase." Explain whether the previous statement is correct or not
What will be an ideal response?