The Fact That We Observe a Trade-Off Between Risk and Return

question 173

True/False

The fact that we observe a trade-off between risk and return is puzzling to economists, because that observation conflicts with the notion that most people are risk averse.

---

Definitions:

Id

A component of Sigmund Freud's psychoanalytic theory, representing the unconscious part of the psyche that operates on the pleasure principle and seeks immediate gratification.

Impulse Control

The ability to resist or delay an impulse, drive, or temptation to act.

Psychoanalytic Theory

Originated by Sigmund Freud, this theory focuses on the influence of the unconscious mind on behavior, emphasizing childhood experiences and sexual drives.

Sublimation

A defense mechanism where socially unacceptable impulses or idealizations are unconsciously converted into socially acceptable actions or behavior.