Which one of the following terms is used in Economics to denote a technique for avoiding a risk by making a counteracting transaction ?
[amp_mcq option1=”Dumping” option2=”Hedging” option3=”Discounting” option4=”Deflating” correct=”option2″]
This question was previously asked in
UPSC CDS-1 – 2016
Hedging is an investment strategy used to offset potential losses or gains that may be incurred by a companion investment. It involves taking an opposite position in a related asset or derivative. The term describes a technique for avoiding a risk (like price fluctuations) by making a counteracting transaction to protect against that risk. Dumping refers to selling goods at an unfairly low price. Discounting relates to calculating present value or deducting interest. Deflating is a reduction in the general price level.