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

Mental accounting refers to the different values people place on money, based on subjective criteria, often leading them to treat money differently depending on its source or intended use. Establishing a budget helps in organizing these mental accounts more effectively, thereby disciplining spending behavior.

When People Are in Financial Difficulty an Advisor Will Usually