Behavioral Economics Flashcard

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Naresh started a new job and is having some of his paycheck deposited directly into a savings account. Which of the following values BEST explains why Naresh does this on a regular basis? Inner, Social, Physical, Financial

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Financial

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What does Ginny mean by saying, "I made a budget for myself in my personal finance class and used my values to decide how I want to use my money."?

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Ginny identified what is important to her and used that knowledge to decide how to use her money.

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What are social values, as they pertain to money?

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How your family, friends, and community members impact your feelings about money

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Behavioral economics...

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Combines economics and psychology to study why people behave the way they do in the real world

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Cognitive bias is...

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An error in the way we think that can influence our decisions

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You go to a restaurant and order a big meal. Even though you’re full, you keep eating because it was expensive. This is an example of...

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The Sunk Cost Fallacy

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Which of the following is TRUE about cognitive biases? It is easy to recognize when cognitive biases are influencing our own decisions, There is rarely anything you can do to combat a cognitive bias’ influence, There are only a handful of cognitive biases that exist, Awareness is often the first step to overcoming the influence of a cognitive bias

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Awareness is often the first step to overcoming the influence of a cognitive bias.

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Andrew wants to buy a specific model of a new car. He conducts research and finds many resources that highlight the benefits of that car model. Which cognitive bias might be influencing Andrew’s decision making?

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Confirmation Bias

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Mina wants to start using an investment app that all of her friends are raving about. She hasn’t done any research on the app, but she trusts her friends’ judgment. At home, Mina’s mom points out that Mina is being influenced by FOMO and herd mentality. All of the following are things Mina can do to overcome these cognitive biases EXCEPT...

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Watch a positive video about the app, download the app, and start using it that day