Question

If 2 percent growth is your break-even point for an investment project, under which outlook for the economy would you be more inclined to go ahead with the investment: (1) A forecast for economic growth that ranges from 0 to 4 percent, or (2) a forecast of 2 percent growth for sure, assuming the forecasts are equally reliable? What core principle does this illustrate?

Answer 1

Answer: (2) a forecast of 2 percent growth for sure, assuming the forecasts are equally reliable.

Core principle 5 - Stability improves welfare.

Step-by-step explanation:

Based on the information given, I'll be more inclined to go ahead with the investment whereby there is a forecast of 2 percent growth for sure, assuming the forecasts are equally reliable.

It should be noted that when there's uncertainty about the future, it leads to the unattractiveness of investment. Here, the core principle illustrated is Core principle 5 - Stability improves welfare.