Insurance companies charge annual premiums to collect revenue, which they then use to pay customers who file claims for damages they incur. Because of the moral hazard problem insurance companies separate customers into groups. Group 1: customers who file few claims & Group 2: customers that file a lot of claims. After creating these groups, what happens to the average annual premium within a
group?
a. Group 1: average annual premium increasesGroup 2: average annual premium increases
b. Group 1: average annual premium decreasesGroup 2: average annual premium increases
c. Group 1: average annual premium increasesGroup 2: average annual premium decreases
d. Group 1: average annual premium decreasesGroup 2: average annual premium decreases
b
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Refer to the figure below. In response to gradually falling inflation, this economy will eventually move from its short-run equilibrium to its long-run equilibrium. Graphically, this would be seen as
A. long-run aggregate supply shifting leftward B. Short-run aggregate supply shifting downward C. Aggregate demand shifting rightward D. Aggregate demand shifting leftward
All of the following are characteristics of a battle of the sexes game except
A) each player has a tough strategy and a weak strategy. B) the tough strategy and the weak strategy differ for each player. C) each player prefers the Nash equilibrium corresponding to his or her tough strategy. D) each player prefers the same Nash equilibrium.
A system in which money is issued by the government and its value is based uniquely on the public's faith that the currency represents command over goods and services is the
A) transactions approach. B) liquidity approach. C) fiduciary monetary system. D) transaction deposits.
Holding other things constant, if the Japanese Yen, appreciates, it makes the imports to Japan
a. More expensive for Japanese customer b. Less expensive for Japanese customers c. Neither more or less expensive for importers d. None of the above