Assume there are only three possible states of nature for the economy in the future: boom,normal,and recession.If there is a 25% chance of a recession and a 30% chance of a boom,then what is the probability of a normal economy in the future?
A) 45%
B) 30%
C) 25%
D) 100%

Question

Quizplus · Accepted Answer

The probability of all possible outcomes (boom, normal, recession) must sum to 100%. Given a 25% chance of recession and a 30% chance of a boom, the probability of a normal economy is 100% - 25% - 30% = 45%.

Assume There Are Only Three Possible States of Nature for the Economy