Economic Booms and Busts

question 56

Multiple Choice

Economic booms and busts:

• A) can be moderated but cannot be avoided.
• B) can be avoided by employing growth-encouraging institutions.
• C) do not occur, since the economy always grows at a constant pace.
• D) occur only when countries have bad institutions.

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Definitions:

Risky Asset

Any asset that has a significant degree of risk associated with its expected returns, including the possibility of losing some or all of the original investment.

Expected Rate of Return

The average amount of profit or loss one can expect on an investment, based on historical data or estimations of future performance.

Variance

A statistical measurement of the spread between numbers in a data set, reflecting their volatility.

Risky Portfolio

A collection of investments that hold a significant level of risk, aiming for potentially higher returns.