Related to the Economics in Practice on p. 146: Under the Save More Tomorrow retirement plans, employees can pre-commit to save more
A) when the opt out of the social security system.
B) whenever they get a pay raise.
C) at the beginning of each fiscal year.
D) when income tax rates increase.

Question

Quizplus · Accepted Answer

Under the Save More Tomorrow retirement plans, employees can pre-commit to save more whenever they get a pay raise. This system aims to overcome people's present-bias and self-control problems by allowing individuals to commit in advance to increasing their savings rate whenever they receive a pay increase in the future. This approach takes advantage of the fact that people typically save a lower fraction of income when their earnings are low and a higher fraction when their earnings are high.

Related to the Economics in Practice on P