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Asked by Aspen Arellano on Jun 12, 2024

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People find it easier to commit to saving for retirement from next year's salary as opposed to current salary.This behavior is consistent with hyperbolic discounting of income.

Hyperbolic Discounting

A behavioral economics theory, describing how people tend to choose smaller, immediate rewards over larger, delayed ones.

Next Year's Salary

The amount of money or compensation that an individual is projected to earn in the coming year.

Current Salary

The present rate of compensation for employment before any deductions like taxes or retirement contributions.

  • Master the fundamentals of evaluating decisions that extend across multiple time periods and the principle of discounting.
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Ashley LachapelleJun 16, 2024
Final Answer :
True
Explanation :
According to the theory of hyperbolic discounting, individuals tend to value immediate rewards more than future rewards. Therefore, it is easier for them to commit to saving for retirement from their next year's salary as it seems less costly to them than committing to saving from the current salary.

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