Personal Finance Test 1: Unit 1 and 2

Which of the following best describes loss aversion?

• Preferring to spend money now rather than save it

• Feeling a loss more strongly than an equivalent gain

• Making decisions based on group behavior

• Believing current information is always accurate

The endowment effect refers to

• Assigning more value to something you already own

• Buying something just because everyone else is

• Focusing only on information that supports your opinion

• Ignoring early information when making decisions

Which scenario best demonstrates present bias?

• Choosing to spend money on a concert instead of saving for college

• Selling stock that is losing value to avoid a loss

• Shopping based on customer reviews

• Changing careers for better long-term pay

When looking for a used car, Mia first sees one listed for $15,000. Later, she finds a similar car for $12,000 and feels like it's a bargain, even though the market value is $10,500. Which cognitive bias is influencing her decision?

• Present Bias

• Anchoring

• Confirmation Bias

• Loss Aversion

Herd Mentality in financial decisions means:

• Following your budget strictly

• Making decisions based on what others are doing

• Avoiding advice from others

• Investing only in safe options

Which cognitive bias may cause someone to overlook negative reviews of a product they want?

• Present Bias

• Anchoring

• Confirmation Bias

• Loss aversion

If a student decides to skip building an emergency fund because they "need" the newest phone, they are showing

• Anchoring

• Loss Averesion

• Present Bias

• Endowment Effect

Which of the following demonstrates how inner values influence financial decisions?

• Choosing a job based on location to stay near family

• Buying a product due to an advertisement

• Using a credit card for rewards points

• Ignoring negative market trends

Understanding cognitive biases is important because...

• It eliminates financial risks

• It guarantees higher income

• it helps people make more informed financial decisions

• it reduces the need for budgets

Non-income factors that often influence job choices include:

• job satisfaction, family needs, location

• Interest rates and credit scores

• Insurance and loan availability

• Tax refunds and deductions