DC Fin Lit - Mod 1

Behavioral economics and financial behaviorists believe that

• We can't predict how people will make financial decisions

• People always behave in a rational way when making financial decisions

• People will re-evaluate their viewpoints when they receive new information

• People do not always behave in a rational way when making economic decisions

What is the relationship between salary levels and happiness?

• Higher salary levels consistently lead to higher levels of happiness, with no exceptions.

• There is no relationship

• Most people are satisfied with their salary.

• People become accustomed to salary levels and eventually want to earn more.

FOMO, the Fear of Missing Out, is best demonstrated by which of the following?

• Avery wants to go to the Taylor Swift concert that all of her friends have seen and raved about

• John takes a cycling class after seeing a sign for the class at his gym

• Cindy see a new cell phone advertised and decides to buy it

Cognitive bias is...

• The belief that a person should change their opinions when new facts arise

• A rational decision based on facts

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

How has social media marketing evolved over the past few decades?

• Modern marketing use detailed consumer data to create personalized ads for each user

• How has social media marketing evolved over the past few decades?

• Modern marketing urges you to create financial decisions that align with your goals

Jack spends all day Sunday seeing new homes, but none are what he wants. What is his sunk cost he should ignore when deciding whether or not to make an offer on a house that day?

• The cost of the home inspection

• The cost of the house

• The time and gas money he spent looking at houses that day

• The time and gas money he will spend in the future looking at more houses

What psychological concept refers to the tendency of individuals to strongly prefer avoiding losses over acquiring equivalent gains

• opportunity cost

• risk aversion

• loss aversion

• delayed gratification

What term is used to describe the phenomenon where individuals tend to follow the actions or decisions of a larger group, often leading to irrational behaviors?

• individualism

• herd mentality

• cognitive bias

• confirmation bias

Despite warnings from experts, experienced investor Mark confidently invests a large sum in a struggling startup due to his belief in its potential. As the startup faces setbacks, Mark remains overly certain in its success, ignoring mounting risks and continuing to invest more money. What cognitive bias is Mark exhibiting?

• confirmation bias

• overconfidence bias

• anchoring bias

• hindsight bias

Alex decides to attend an industry conference due to colleagues' enthusiastic discussions about networking and insights, despite reservations about its relevance and a busy schedule.

• confirmation bias

• anchoring bias

• fear of missing out

• hindsight bias