Why isn't it correct to say that people who are risk averse avoid risk?
What will be an ideal response?
This statement really isn't correct. A better statement would be that people who are risk averse need to be compensated to take additional risk. The degree of additional compensation is referred to as the risk premium and this will vary depending on the degree of risk aversion.
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The law of demand indicates that as the cost of an activity:
A. rises, the level of the activity may or may not increase depending on the individual. B. falls, less of the activity will occur. C. rises, less of the activity will occur. D. rises, more of the activity will occur.
The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of
A) discretionary monetary policy. B) the discretionary multiplier effect. C) discretionary fiscal policy. D) automatic stabilizers.
According to John Maynard Keynes people hold money for each of these reasons except the _____ motive.
A. precautionary B. price C. speculative D. transactions
A reduction in production costs will not result in which of the following?
A. rightward shift of the supply curve. B. increase in supply. C. greater willingness and ability of producers to supply a larger quantity at any given price. D. greater willingness and ability of consumers to demand a larger quantity at any given price.