Read the passage below and identify the core principle of 'nudge theory':

"Behavioral economists advocate 'choice architecture' over coercive mandates. By designing default options—such as automatically enrolling employees into retirement savings plans while preserving their freedom to opt out—governments can nudge citizens toward beneficial decisions without restricting individual liberty."

According to the passage, 'nudge theory' operates by:

Answer and explanation

Correct answer: D. altering decision environments to encourage choices without mandates

  1. Step 1: Locate the defining characteristics in the text: 'advocate choice architecture over coercive mandates', 'designing default options... while preserving their freedom to opt out', and nudging citizens 'without restricting individual liberty'.
  2. Step 2: Nudge theory modifies choice architecture to steer behavior gently while preserving autonomy.
Answer
altering decision environments to encourage choices without mandates.
Why not the others: 'imposing punitive financial penalties on citizens who make bad choices' describes coercive regulation, the opposite of nudging; 'mandating compulsory government savings programs with zero opt-out' contradicts preserving freedom to opt out; 'prohibiting private financial institutions from offering investments' is an irrelevant extreme measure.

Practise more Higher Education Reading, Text Analysis, and Scientific Evaluation.

Free questions with an explanation for every one, and full timed MUET Malaysia (Malaysian University English Test) mock tests.

All Higher Education Reading, Text Analysis, and Scientific Evaluation questionsTake a mock test

More Higher Education Reading, Text Analysis, and Scientific Evaluation questions