Which of the Following Games Might a Risk-Averse Person Play

question 26

Multiple Choice

Which of the following games might a risk-averse person play?

• A)a game where she has a 70 percent chance of winning $1 and a 30 percent chance of losing $1
• B)a game where she has a 60 percent chance of winning $100 and a 40 percent chance of losing $100
• C)a game where she has a 60 percent chance of winning $2 and a 40 percent chance of losing $1
• D)All of the above are correct.

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Definitions:

Federal Funds Rate

The interest rate at which banks lend reserve balances to other banks overnight, which is determined by the Federal Reserve in the U.S.

M1 Money Supply

A classification within the money supply encompassing all tangible forms of money such as currency and coins, alongside demand deposits and additional liquid assets owned by the central bank.

M2 Money Supply

A measure of the money supply that includes cash, checking deposits, and easily convertible near money, such as savings deposits and money market securities.

Required Reserve Ratio

The fraction of depositors' balances that banks must have on hand as cash, determined by the central bank to ensure the bank's liquidity and stability.