Which of the following best describes angel investors in the context of economics?

• A. Banks that offer loans to entrepreneurs at low interest rates.
• B. Venture capital firms that invest in publicly traded companies.
• C. Government agencies that provide grants to small businesses.
• D. Wealthy individuals who seek high returns through private investments in startups.

Answer: (D)

Verified step by step guidance

1. Understand the role of angel investors in economics: Angel investors are typically wealthy individuals who provide capital to startups or early-stage companies in exchange for ownership equity or convertible debt.
2. Differentiate angel investors from other sources of funding: Unlike banks, angel investors do not offer loans but invest directly in the business, often taking on higher risk for potentially higher returns.
3. Recognize that venture capital firms are different entities: They usually manage pooled funds from multiple investors and invest in companies that may be more established or publicly traded, unlike angel investors who invest their own money.
4. Note that government agencies provide grants or subsidies, which are non-repayable funds, and are not considered angel investors since they do not seek financial returns.
5. Conclude that the best description of angel investors is 'Wealthy individuals who seek high returns through private investments in startups,' as this captures their personal investment nature and risk-return profile.