A very controversial issue in many states currently is whether or not insurance companies should be allowed to use a person's credit history as a tool in determining the individual's automobile and homeowner insurance premium. Without getting into the legal or ethical issues, what do you think the insurance companies' motives might be for wanting to use the credit report?
What will be an ideal response?
This could be an information issue. It is very difficult and expensive for an insurance company to monitor a policyholder's behavior after the fact, so it may be that the insurance company is looking for a proxy (a stand in) for moral hazard, and it may be that a person's credit history has been found to be an indicator as to whether or not the individual may become a moral hazard.
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Recently, the level of GDP has declined by $60 billion in an economy where the marginal propensity to consume is 0.75. Aggregate expenditures must have fallen by
A. $15 billion. B. $30 billion. C. $45 billion. D. $60 billion.
The cost disease of personal services is caused by
A. falling labor productivity across industries. B. uneven productivity growth across industries. C. the excludability of personal services. D. the nonexcludability of personal services.
Is fiscal policy able to influence economic growth?
a. yes, in the short run b. no, because it affects only aggregate demand c. yes, in the long run d. no, because it affects only aggregate supply
Which of the following is true for the law of demand?
A. Sellers increase the quantity of a good available as the price of the good increases. B. An increase in price results from false needs. C. There is an inverse relationship between the price of a good and the quantity of the good demanded. D. Prices increase as more units of a product are demanded.