As long as at least some output shocks are asymmetric, it is possible to:
A) avoid all risk.
B) lower the volatility of income by international diversification of capital assets.
C) lower the risk of default.
D) avoid any consumption declines as a result of the shocks.

Question

Quizplus · Accepted Answer

International diversification of capital assets can help lower the volatility of income by spreading out risk across multiple countries and industries. However, it is not possible to avoid all risk or completely eliminate consumption declines resulting from output shocks. Additionally, the presence of asymmetric shocks means that there is still some inherent risk involved even with international diversification.

As Long as at Least Some Output Shocks Are Asymmetric