FCEE Ch1 Quiz

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

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

• Ginny used the value of her bank account balance to decide how to use her money

• Ginny asked her friends and family for advice to decide how to use her money

• Ginny followed recommendations she saw on social media to decide how to use her money

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

What are social values, as they pertain to money?

• How you, personally, care and think about finances

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

• How companies and advertisement make you feel about money

• How banks and other financial institutions treat you and your money

Behavioral economics...

• Is a field of economics that studies people who make rational and objective decisions

• Analyzes how different economies around the world behave over time

• Tracks and examines stock market trends over a certain period of time

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

The belief that our abilities are better than they actually are is an example of...

• Overconfidence

• Mental accounting

• Hedonic adaptation

• Cognitive dissonance

Which of the following is TRUE about cognitive biases?

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

• 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

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?

• Confirmation bias

• Hedonic Adaptation

• The Sunk Cost Fallacy

• Overconfidence

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...

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

• Take time to reflect and identify why she is so eager to use the app

• Research the app independently to form her own opinion

• Consider the potential risks and benefits of using the app

What is the Anchoring Effect?

• The tendency to rely on the first piece of information when making decisions

• The ability to delay an impulse for a more favorable reward

• A mental shortcut to simplify problems

• The tendency to conform with others in a group

What is a Cognitive Bias?

• A mental shortcut to simplify problems

• The way a person understands events based on their beliefs

• The tendency to conform with others in a group

• The ability to delay an impulse for a reward