During an economic boom, people are more likely to:

Spend more freely, believing good times will continue.

If investors describe a market downturn as a "storm", what psychological impact might this have on their behaviour?

They might panic and sell their assets.

If a financial market is described as a "rollercoaster", what does this metaphor suggest about the market?

It has unpredictable ups and downs

You found a $100 bill on the street. According to heuristics, the way you spend it would most likely be influenced by:

The feeling that it's "free money" to splurge

How does the metaphor "busting" economy typically influence people's perception and behaviour?

People become more cautious and increase their savings.

Which is a real life example of behaviour influenced by mental accounting?

You receive a bonus at work and immediately book a vacation.

Which of the following scenarios best illustrates a limitation of using heuristics?

Buying a product based on a friend's recommendation without researching.

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Understanding Economic Heuristics and Metaphors

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Answers

1
During an economic boom, people are more likely to:
Become more risk-averse.
Save more money in anticipation of a downturn.
Spend more freely, believing good times will continue.
Withdraw from the market entirely.
2
If investors describe a market downturn as a "storm", what psychological impact might this have on their behaviour?
They might feel it is an opportunity to buy.
They might believe it is a short-term issue.
They might see it as a normal fluctuation.
They might panic and sell their assets.
3
If a financial market is described as a "rollercoaster", what does this metaphor suggest about the market?
It has unpredictable ups and downs
It is growing consistently
It is slow and steady
It is completely safe
4
If the price of a product is lower than the price range you are used to, you are more likely to consider it a good deal
False
True
5
You found a $100 bill on the street. According to heuristics, the way you spend it would most likely be influenced by:
Saving it for a rainy day
Consulting with a financial advisor
Detailed budgeting analysis
The feeling that it's "free money" to splurge
6
How does the metaphor "busting" economy typically influence people's perception and behaviour?
People start new businesses believing it's a good time to invest.
People tend to save less and invest more, anticipating lower prices.
People become more optimistic and increase their spending.
People become more cautious and increase their savings.
7
Which is a real life example of behaviour influenced by mental accounting?
You receive a salary rise and start a savings account for your student fees
You receive a bonus at work and immediately book a vacation.
You receive a tax refund and use it to pay off your debt.
You receive a bonus at work and immediately invest it in a retirement fund
8
The adaptation level theory states that people evaluate prices based on a weighted mean of past prices they have paid.
False
True
9
Which of the following scenarios best illustrates a limitation of using heuristics?
Buying a product based on a friend's recommendation without researching.
Consulting multiple sources of information before investing.
Thoroughly researching a product before making a purchase.
Following a long-term investment plan based on historical data.
10
Your friend tells you the stock market has been rising steadily, so it's a great time to invest. They are using:
Availability heuristic
Anchoring
Good-Begets-Good heuristic
Loss-aversion

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