According to the textbook, one of the most fundamental purposes of insurance is to
A. eliminate risk entirely for everyone.
B. transfer risk from risk seeking people to risk neutral people.
C. transfer risk from those who wish to avoid it to those who are willing to bear it (for a fee).
D. eliminate risk entirely, while tolerating uncertainty.
Answer: transfer risk from those who wish to avoid it to those who are willing to bear it (for a fee).
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A price ceiling in the market for gasoline that is below the equilibrium price will lead to
A) the quantity demanded of gasoline exceeding the quantity supplied. B) an increase in the demand for gasoline. C) a decrease in the supply of gasoline. D) the quantity supplied of gasoline exceeding the quantity demanded. E) no change in the market since the price ceiling is below the equilibrium price.
"Complete" crowding out of fiscal policy occurs when the
A) LM curve is horizontal. B) LM curve is upward-sloping. C) LM curve is vertical. D) IS curve is vertical.
Most markets involve the use of money for transactions because:
a. goods and services can be exchanged more easily with money than without it. b. goods and services cannot be exchanged without money. c. using money requires a double coincidence of wants. d. the transaction costs of using money are very high. e. the value of money remains same across countries over time.
Concern about an international crisis has caused consumers to save their money and postpone big purchases. What is the effect on aggregate demand and aggregate supply?
(A) Both aggregate demand and aggregate supply will decrease, leading to lower real GDP. (B) Aggregate demand will decrease, lowering both real GDP and the price level. (C) Aggregate supply will decrease, raising the price level and lowering real GDP. (D) No change on aggregate demand and aggregate supply.