Every dollar that Paula earns working overtime she saves for her retirement. This week she has added $80 to her retirement account by working overtime. On her way home from work on Friday, Paula wins $80 in a radio contest and drives to Janice Jewelers to buy a pair of $80 earrings. Paula is displaying:

Question

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Paula is displaying mental accounting by treating the two $80 amounts differently. She is saving the money she earned from overtime for her retirement, but spending the money she won in the radio contest on earrings. This shows that she is mentally accounting for the two amounts separately, even though they are both worth $80.

Every Dollar That Paula Earns Working Overtime She Saves for Her