Mateo has $2,000 in cash, which he's saving to spend on a trip over spring break.. However, during the holiday season he spends $400 of that cash on gifts to avoid using his credit card, thus avoiding interest charges. He gradually replaces the $400 over the next two months. An economist would say this behavior is:

Question

Quizplus · Accepted Answer

Mateo's decision to spend cash on gifts to avoid interest charges and then gradually replace the money shows rational behavior. He is making a decision that minimizes his costs (interest charges) while planning to replenish his savings, demonstrating a strategic approach to managing his finances.

Mateo Has $2,000 in Cash, Which He's Saving to Spend