Figure 9-3

question 357

Multiple Choice

Figure 9-3. The figure shows a utility function for Rob.

-Refer to Figure 9-3. From the appearance of Rob's utility function, we know that

• A) if Rob owns a house, then he definitely would buy fire insurance provided the cost of the insurance were reasonable.
• B) Rob would voluntarily exchange a portfolio of stocks with a high average return and a high level of risk for a portfolio with a low average return and a low level of risk.
• C) Rob is risk averse.
• D) Rob is not risk averse.

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Definitions:

Investment

The purchase of goods that are not consumed today but are used in the future to create wealth, including assets like property, stocks, or bonds.

Aggregate Demand Curve

Curve showing planned purchase rates for all goods and services in the economy at various price levels.

Price Level

An index that measures the average price of goods and services in an economy at a specific time.

Aggregate Supply Curve

A graphical representation that shows the total quantity of goods and services that producers in an economy are willing to produce and sell at different price levels.