Financial Literacy Semester Exam Review

You see an advertisement promoting a sale “for a limited time only!” with a countdown clock. Which bias is being used?

• Herd Mentality

• Loss Aversion

• Hedonic Adaptation

• Fear of Missing Out (FOMO)

Behavioral economics is …

• The study of how rational people make economic decisions

• The study of how irrational factors affect individual’s economic decisions

• The study of how economies around the world interact with each other

• The study of how investors choose which stocks to buy and sell

Peter can choose from two retirement accounts. Fearing a loss, he opts for the more conservative one. This is a type of

• Confirmation Bias

• Overconfidence

• Loss Aversion

• Fear of Missing Out (FOMO)

Confirmation bias is …

• The tendency to seek out information that supports our existing beliefs

• The tendency to value something more because you own it

• The belief that we are better at something than we actually are

• The belief that we should do something because our friends are doing it

People who win the lottery tend to return to their original levels of happiness after the novelty of winning wears off.

• This is an example of the Endowment Effect

• This is an example of Confirmation Bias

• This is an example of Hedonic Adaptation

• This is an example of Herd Mentality

You are new to a city and find two restaurants near each other that offer a similar menu. You pick the more crowded one.

• This is an example of Fear of Missing Out (FOMO)

• This is an example of Herd Mentality

• This is an example of Sunk Cost Fallacy

• This is an example of Overvaluing

• Credit card

• signature

• ATM

• check

• currency

• coins

Taking more money out of your account than is available​ is called?

• Overdraw
• Deposit
• Withdraw
• Balance

How do financial institutions make most of their money?

• Fees
• Interest
• Mutual Funds
• Loan Payments