When people are in financial difficulty an advisor will usually recommend establishing a budget for spending.One reason is that a budget will act to discipline behavior if people psychologically are subject to
A)Bounded rationality
B)Mental accounts
C)Segregated gains
D)The halo effect

Question

Quizplus · Accepted Answer

The concept of mental accounting refers to the tendency of people to mentally segregate money into different categories based on subjective criteria, such as the source of the money or the intended purpose of the money. By establishing a budget, people are able to create mental accounts for their money and allocate it accordingly. This helps to discipline behavior by providing a framework for spending that reflects their financial circumstances and priorities. Bounded rationality, segregated gains, and the halo effect may also affect financial behavior, but they are not directly related to the benefits of budgeting in the context of financial difficulty.

When People Are in Financial Difficulty an Advisor Will Usually