When People Who Buy Insurance Change Their Behavior After the Purchase

question 157

Multiple Choice

When people who buy insurance change their behavior after the purchase because they are protected from loss by the insurance, the insurance market is said to face the problem of

• A)moral hazard.
• B)adverse selection.
• C)asymmetric information.
• D)economic irrationality.

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Definitions:

Gross Domestic Product (GDP)

The full valuation, in market or monetary terms, of all end goods and services generated within the confines of a country's borders in a particular time span.

Household Production

The process by which families produce goods and services for their own use, typically including tasks such as cooking, cleaning, and childcare.

Leakages

Economic terms referring to the outflow of funds from the economy, such as savings, taxes, and imports, that can reduce the impact of investment and government spending.

Domestic Spending

The total spending on goods and services within a country, including both consumer spending and government expenditure.