Economics Risk And Return Questions
The risk-return tradeoff is a fundamental concept in economics that states that higher potential returns are associated with higher levels of risk. In other words, investors or individuals who are willing to take on more risk have the potential to earn higher returns on their investments. Conversely, those who prefer lower levels of risk typically have lower potential returns. This tradeoff is based on the principle that higher-risk investments have a greater chance of experiencing losses or volatility, while lower-risk investments offer more stability but with lower potential for significant gains.