Insurance works because it:
A. reallocates the costs of unforeseen events, sparing any individual from taking the full hit.
B. makes it less likely that their clients will experience unforeseen events.
C. prevents any one individual from experiencing all the unforeseen events.
D. None of these statements is true.
C. prevents any one individual from experiencing all the unforeseen events.
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Answer the following statements true (T) or false (F)
1. A free good may eventually become an economic good. 2. Payment for the use of capital is made in the form of rent. 3. The study of economics would be less complicated if differences in subjective judgments did not exist. 4. Equilibrium is a position of stability or rest.
Suppose the economy is initially experiencing a recessionary gap. A reduction in the size of the budget deficit will cause which of the following in the short run?
A. an increase in the size of the recessionary gap and decrease in real GDP. B. a reduction in the size of the recessionary gap and increase in real GDP. C. an inflationary gap. D. an increase in inflation and increase in aggregate supply.
Inflation targeting is a framework for carrying out monetary policy whereby
A) the central bank adopts a rigid target for inflation and ignores declines in output. B) the central bank commits to achieving a publicly announced level of inflation. C) the central bank commits to achieving a target level of inflation which is never announced publicly. D) the central bank commits to a monetary growth rule.
To stimulate investment spending, Congress would most likely decrease
a. personal income taxes. b. capital gains taxes. c. property taxes. d. real interest rates.