Question

question 14
when someone decides to keep their vacation savings separate from their debt repayment funds, what are they demonstrating?
select an answer from the options below
a sunk cost fallacy
b endowment effect
c anchoring bias
d mental accounting

Explanation:

Mental accounting refers to the tendency of people to separate their money into distinct mental accounts for specific purposes, rather than treating all money as interchangeable. Keeping vacation savings separate from debt repayment funds is a classic example of this behavior. Sunk cost fallacy involves clinging to past investments, endowment effect is overvaluing owned items, and anchoring bias relies on initial information, none of which match the scenario.

Answer:

D. Mental accounting