Question

Many college students have an accompanying savings account when they open a free checking account. There are many other savings options, such as cash deposits (CDs), that pay higher rates, but young adults rarely purchase such investments. What concept would a behavioral economist use to explain this behavior?

	a.	inter-temporal timing
	b.	framing
	c.	status quo bias
	d.	priming

Answer 1

Option C. Status quo bias

Explanation: Status quo bias is an emotional bias in which a decision-maker gives preferences to the current state of affairs. The associated savings account comes as a default option with the free-checking account. Therefore, the college students provide preference to the current statue of affairs i.e. continuing with the default savings account instead of going for other savings options, such as cash deposits (CDs) because of the status quo bias.