A risk that affects only individuals or small groups and not the entire economy is called a:

• A. idiosyncratic risk
• B. market risk
• C. systematic risk
• D. aggregate risk

Answer: (A)

Verified step by step guidance

1. Understand the concept of risk in microeconomics and finance: risks can be categorized based on their scope and impact on the economy or individuals.
2. Identify that 'idiosyncratic risk' refers to risks that affect only individuals or small groups, such as a company-specific event or personal circumstances.
3. Recognize that 'systematic risk' or 'market risk' affects the entire economy or large segments of the market, such as recessions or interest rate changes.
4. Note that 'aggregate risk' is another term related to risks impacting the whole economy, similar to systematic risk.
5. Conclude that the risk affecting only individuals or small groups, and not the entire economy, is called 'idiosyncratic risk'.