The Government Is Considering a Mandatory Savings Program That Forces

question 20

Multiple Choice

The government is considering a mandatory savings program that forces people to save 8% of their income each year for retirement. What behavioral biases might be used as a justification for such a program? (Choose all that apply.) ?

• A)Limited cognitive ability,preventing people from being able to accurately estimate how much an investment early in one's career will grow.
• B)Limited willpower,preventing people from being able to give up the pleasure of current consumption for the benefits of consumption later in retirement.
• C)Limited commitment power,leading the government to use the funds for current expenditures.
• D)Risk aversion,leading people to consume now rather than wait until the uncertain future.

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Definitions:

Karen Horney

A German psychoanalyst known for her theory of neurotic needs and her work on neurosis, particularly the ways in which it pertains to women.

Psychodynamic Theories

Theories proposing that behavior is the result of internal psychological forces that often stem from childhood experiences.

Dynamic Interaction

The continuous and changing interplay between individuals or elements in a system or process.

Mental Processes

The internal, subjective mechanisms and activities through which individuals perceive, remember, think, and feel.