Which of the Following Is a Fundamental Purpose of the Principle

question 12

Multiple Choice

Which of the following is a fundamental purpose of the principle of indemnity?

• A)to reduce moral hazard
• B)to minimize physical hazards
• C)to settle property insurance losses on a replacement cost basis
• D)to require deductibles in all property insurance policies

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Definitions:

Market System Failure

An economic situation where the allocation of goods and services by a free market is not efficient, often justifying government intervention.

Unfunded Liability

A future government spending commitment (liability) for which the government has not legislated an offsetting revenue source.

Social Security

The social insurance program in the United States financed by federal payroll taxes on employers and employees and designed to replace a portion of the earnings lost when workers become disabled, retire, or die.

Monetary Policy

A central bank’s changing of the money supply to influence interest rates and assist the economy in achieving price-level stability, full employment, and economic growth.