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An individual receives a large year-end bonus and immediately makes a plan to deposit the entire amount into a high-yield savings account for a down payment on a house in the future. However, over the next few weeks, they spend the bonus on a luxury vacation and expensive electronics instead, telling themselves they will start saving aggressively from their regular salary next month. Which of the following best explains this individual's actions?
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Economics
Economy
Introduction to Macroeconomics Course
Ch.3 Aggregate demand and the multiplier model - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
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Application in Bloom's Taxonomy
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Related
An individual receives a large year-end bonus and immediately makes a plan to deposit the entire amount into a high-yield savings account for a down payment on a house in the future. However, over the next few weeks, they spend the bonus on a luxury vacation and expensive electronics instead, telling themselves they will start saving aggressively from their regular salary next month. Which of the following best explains this individual's actions?
Retirement Savings Decision
Analyzing Failures to Follow a Plan
An individual's failure to follow a long-term financial plan due to an unforeseen external event, such as a sudden job loss, is a clear example of time-inconsistent behaviour.