Economic Semester Exam
1. If the U.S. dollar appreciates, it means that a. there is an increase in value of the dollar. b. there is a decrease in the value of the dollar. c. people around the world will use the U.S. dollar more often. d. the U.S. government announced a new exchange rate.
A
If people in Canada double their purchases of U.S. goods, the U.S. dollar will _____________ a. appreciate relative to the Canadian dollar. b. depreciate relative to the Canadian dollar. c. be used more in Canada. d. be fixed to the Canadian dollar.
A
In what situation would it be beneficial to use a rent-to-own agreement to buy a television? a. Ethan is on a temporary three-month work assignment in New York, living in a furnished apartment, but has no television. b. Samantha wants a new television but is not sure if she can afford it. c. Alex wants a new television and doesn't want to wait long enough to save the money. d. Emma wants a new television and has a poor credit rating; she doesn't have the money and can't get a loan.
A
When do credit card holders pay interest? a. When they don't pay the card balance in full each month b. Anytime they spend more than a specified amount c. As soon as they make their first purchase they start paying interest
A
If you deposited money in a savings account that paid 1% interest, approximately how long would it take your money to double? a. 72 years b. 36 years c. 18 years d. 2 years e. It is impossible to determine with the information given.
A is correct. (72 ÷ 1 = 72)
Ultimately, who is responsible for your financial decisions? a. you b. your parents c. your teacher d. your high school counselor
A is correct. Yes, ultimately you are responsible for your financial decisions.
Each option below lists the inflation rate for three consecutive years. Which shows disinflation? a. 3 percent, 4 percent, 5 percent b. 3 percent, 3 percent, 3 percent c. 5 percent, 4 percent, 3 percent d. -5 percent, -3 percent, -1 percent
C
If from one month to the next people in Country A have to spend more of their currency on goods from country B, the currency in country A has _________________ relative to the currency in country B. a. no value b. a fixed value c. depreciated d. appreciated
C
When bankers examine factors such as willingness to repay the debt and the borrower's reputation for paying bills and debts based on past behavior, which of the C's are they considering? a. capital b. capacity c. character d. collateral
C
Which of the following statements is not true concerning rent-to-own agreements? a. There may be additional fees attached. b. The cost is higher than outright purchase of the item. c. The rent-to-own store must tell you the APR of the loan. d. Financial disclosure laws do not always apply.
C
Which of the following statements concerning a bank savings account is false? a. Deposits are insured for at least $100,000. b. Your money will earn interest. c. You will pay a hefty fee for cashing or depositing your paycheck into a savings account. d. You can use an ATM or debit card with a savings account.
C is Correct, this statement is false. Savings accounts do not charge fees for deposits.
Net pay is the amount a worker takes home, but it also reflects the amount available to spend or save, which is called: a. Gross pay b. Credit c. Disposable income d. Fees
C is correct. Disposable income is the amount available to spend or save after deductions.
The National Jump$tart Coalition financial literacy survey revealed: a. high school seniors know quite a lot about personal finance. b. high school seniors, in general, know how to manage their money very well. c. high school seniors have a lot to learn about personal finance. d. if the test were graded, high school seniors received a passing grade.
C is correct. Students only answered 48.3 percent of the questions correctly.
An asset the creditor can take if the borrower doesn't repay the debt is called _______ a. capital. b. capacity. c. character. d. collateral.
D
What is interest? a. A risky loan b. A hobby c. Benefits that encourage certain behavior d. The price of using someone else's money
D
Which of the following is not a key element of a contract? a. competent parties b. consideration c. mutual agreement d. legal objective e. All of the above are key elements of a contract.
D
In the long run, increasing the money supply a. increases real GDP. b. decreases unemployment. c. increases real consumption. d. increases inflation.
D is correct. The theory of money neutrality states that, in the long-run, changes in the money supply cause changes in variables such as prices and wages, but not in unemployment or real—or inflation-adjusted—variables such as real GDP and real consumption. So, the number of people employed does not increase, the amount of goods and services produced doesn't increase, and people don't buy more goods and services—only prices increase.
2. When bankers examine factors such as level of income, length of time on the job and how much debt the borrower has relative to income, which of the C's are they considering? a. capital b. capacity c. character d. collateral
B
An advantage of using a debit card is that: a. you can buy now and pay later. b. it is convenient to carry and use. c. you never have to pay more than $50 for unauthorized use. d. you can make purchases, whether or not you have money in the account.
B
Gross pay is. a. the amount earned over a lifetime. b. the amount earned before deductions or taxes are taken out. c. the amount received after deductions and taxes have been taken out. d. computed by multiplying the number of hours by the hourly rate of pay, then subtracting federal and state income taxes.
B
In which case can Alphaland consume at point Z? a. Alphaland can consume at point Z if it is self-sufficient in the production of all its goods and services. b. Alphaland can consume at point Z if it engages in specialization and trade. c. Both a and b. d. Alphaland cannot consume more than it produces.
B
Why are there laws regarding credit cards? a. To protect the banks b. To protect consumers c. The government likes to interfere d. To protect the credit card companies
B
Number of Baked Goods Decorated in One Hour Cupcakes Cookies Wilson 30 10 Kendall 25 5 According to their comparative advantage: a. Wilson should decorate cupcakes and Kendall should decorate cookies. b. Kendall should decorate cupcakes and Wilson should decorate cookies. c. To avoid boredom, Wilson should decorate ½ of the cupcakes and cookies and Kendall should decorate the other half. d. Wilson should decorate both because he is better at both.
B is correct! For Wilson, 1 cookie costs 3 cupcakes; 1 cupcake costs 1/3 cookie. For Kendall, 1 cookie costs 5 cupcakes; 1 cupcake costs 1/5 cookie. Wilson gives up 3 cupcakes, but Kendall gives up 5. Wilson's opportunity cost of producing cookies is lower than Kendall's, so Wilson should decorate cookies. For Wilson, 1 cupcake costs 1/3 cookie. For Kendall, 1 cupcake costs 1/5 cookie. Kendall gives up 1/5 cookie, but Wilson gives up 1/3 cookie. Kendall's opportunity cost of producing cupcakes is lower than Wilson's, so Kendall should decorate cupcakes.
Leena and Susan both produce cupcakes. Leena's opportunity cost of producing cupcakes is lower than Susan's opportunity cost of producing cupcakes. Which of the following statements must be true? a. Susan has a comparative advantage in producing cupcakes. b. Leena has a comparative advantage in producing cupcakes. c. Leena has an absolute advantage in producing cupcakes. d. Susan has an absolute advantage in producing cupcakes.
B is correct! Leena has the lower opportunity cost in producing cupcakes, so she has the comparative advantage in producing cupcakes.
Orchardland produces apples and oranges, at a combination on its production possibilities frontier (shown above). If the people decide to produce more apples: a. Orchardland will have more apples and the same number of oranges. b. Orchardland will have more apples and fewer oranges. c. Too bad for Orchardland. It cannot produce more apples. d. It's impossible to determine the outcome from the information provided.
B is correct! Orchardland has limited resources, as depicted by its production possibility frontier. If it produces more apples, it will have to use some of the resources it presently devotes to producing oranges. It will have to give up some oranges.
Labor Hours Needed To Cut 1/2 Acre Lawn Trim 8 Bushes Jim 3 3 Bryan 2 1 Who has the absolute advantage in the lawn care business? a. Jim has an absolute advantage in grass cutting and bush trimming. b. Bryan has an absolute advantage in grass cutting and bush trimming. c. Jim has the comparative advantage in trimming bushes. d. Bryan has the comparative advantage in grass cutting.
B is correct! The producer with absolute advantage is the one that can produce more than another producer using the same amount of resources. Bryan can cut more acres of lawn and trim more bushes with an hour of his labor than Jim can.
If you were to deposit $1,000 into an account that paid 10 percent interest compounded semiannually, how much money would you have in the account one year from now? a. $1,500.00 b. $1,102.50 c. $1,100.00 d. $1,052.50 e. $1,050.00
B is correct. ($1,000 x .05 = $50; $1,000 + 50 =$1,050; $1,050 x .05 = $52.50; $1,050 + $52.50 = $1,102.50)
The phrase, a sustained increase in the average level of prices of goods and services in an economy over time, describes which of the following terms? a. Deflation b. Inflation c. Disinflation d. Economic growth
B is correct. Inflation is a sustained increase in the average level of prices of goods and services in an economy over time.
What is net pay? a. The amount earned before all taxes and deductions are subtracted b. The amount earned after all taxes and deductions are subtracted c. Pay that is rounded up for working overtime d. The amount earned after groceries and rent are paid
B is correct. Net pay is the amount earned after all taxes and deductions are subtracted.
The Federal Reserve conducts open market operations by a. buying and selling Treasury securities to influence the discount rate. b. buying and selling Treasury securities to influence the federal funds rate. c. buying and selling of Treasury securities to influence the prime rate. d. buying and selling stocks in the market to influence the stock market.
B is correct. The Federal Reserve conducts open market operations by buying and selling Treasury securities to influence the federal funds rate. "Open market" means that the Fed allows dealers to place bids. The Fed buys from or sells to the dealer who offers the best price. The Federal Reserve buys and sells treasuries regularly to make sure the actual federal funds rate matches the target that the Fed has set for the rate.
If the interest rate on a loan is 5 percent and the inflation rate is 3 percent, the real interest rate is a. 8 percent. b. 2 percent. c. -2 percent. d. -8 percent.
B is correct. The real interest rate is the interest rate adjusted for inflation. To calculate the real interest rate, subtract the inflation rate from the interest rate. In this case, 5 percent (the interest rate) minus 3 percent (the inflation rate) equals 2 percent (the real interest rate).
Which of the following is not one of the three credit bureaus? a. Equifax b. CreditCo c. Experian d. TransUnion e. All of the above are credit-reporting agencies.
B is correct. The three credit-reporting agencies are Equifax, Experian and TransUnion.
Emma borrowed $300 to repair her car. The finance (interest) charge on the loan was $20, and the term on the loan was 14 days. What was the APR for Emma's loan? a. 15 percent b. 174 percent c. 210 percent d. 391 percent e. 548 percent
B is correct. [($20/$300) x 365]/14 = 174%
6. Where can an economy produce? a. At any point inside its production possibilities frontier. b. At any point on its production possibilities frontier. c. Both a and b. d. Neither a nor b.
C
7. When a country has a flexible exchange rate, a. the value of its currency is low. b. the government of that country sets its currency exchange rate. c. supply and demand determine the exchange rate for its currency. d. neighboring countries all agree on an exchange rate for the country's currency.
C
The Federal Reserve has recently added new rules pertaining to Debit Cards. One of the new rules is that: a. you need to be 21 to have a debit card. b. overdraft protection is now mandatory for consumers. c. overdraft protection is now the consumer's choice. d. banks can no longer charge late fees on debit card accounts.
C
The discount rate is the interest rate that a. banks pay when they take a loan from another bank. b. consumers pay when they take loans to buy houses. c. banks pay when they take a loan from the Federal Reserve. d. consumers pay when they buy goods and services using a credit card.
C
The principal on a loan is: a. The lender b. The borrower c. The original amount of money borrowed or still owed on which interest is charged. d. The amount of interest owed on a loan
C
What three factors affect the total price of a car? a. Month of purchase, incentives, income b. Length of contract, geographic location, incentives c. Interest rate, length of contract, size of down payment d. Interest rate, color of car, geographic location
C
Which of the following is an example of using money as a medium of exchange? a. You mow your neighbor's lawn and she pays you in apple pie. b. Grocery store signs clearly state that an apple costs $2, while a steak costs $20. c. You want a slice of pizza. You give the pizza maker $2 and he gives you the pizza. d. Both B and C
C
While traveling in France you really want a croissant. The price is 2.88 euros. How much is this in U.S. dollars? The exchange rate is $1 U.S. = .7208 euros. a. $2 U.S. b. $2.88 U.S. c. $4 U.S. d. $6 U.S.
C
Which of the following statements is false? a. A credit is a deposit to a checking account. b. A debit is a withdrawal from a checking account. c. An overdraft is a fee your bank charges you for opening a checking account. d. Taking money from your account with an ATM card is a debit.
C is Correct, this is a false statement. An overdraft fee is charged to an account holder for taking out more money than is in the account.
If a checking account begins the month with a balance of $35.00 and over the month has debits of $150.00 and credits of $175.00, the balance at the end of the month is ____. a. $10.00 b. $25.00 c. $60.00 d. -$290.00
C is Correct. ($35 - $150 + $175 = $60)
axes for batons if: a. The price of batons is higher than Alphaland's cost to produce axes. b. The price of batons is lower than Betaland's cost to produce axes. c. The price of batons is lower than Alphaland's cost to produce batons. d. The price of batons is higher than Betaland's cost to produce axes.
C is correct! Alphaland can produce batons, but they must give up more axes than Betaland to do so. In other words, it costs Alphaland more to produce batons. So, they will buy their batons from Betaland as long as the price of Betaland batons is not more than it would cost Alphaland to produce the batons themselves.
Labor Hours Needed To Cut 1/2 Acre Lawn Trim 8 Bushes Jim 3 3 Bryan 2 1 Jim and Bryan operate a lawn care business. How would you suggest they divide grass cutting and bush trimming tasks? a. It's only fair that they divide the tasks equally. b. Jim should trim bushes and Bryan should cut grass. c. Bryan should trim bushes and Jim should cut grass. d. Jim should do both tasks, and Bryan should fill in when needed.
C is correct! In two hours, Bryan can cut ½ acre or trim 16 bushes. In one hour, he can cut ¼ acre or trim 8 bushes. Jim, on the other hand, gives up ½ acre when he trims 8 bushes. So, Bryan gives up ¼ acre, Jim gives up ½. Bryan has the lower opportunity cost when he trims bushes, so Bryan should trim the bushes. When Bryan cuts ½ acre, he give up trimming 16 bushes. When Jim cuts ½ acre, he gives up trimming 8 bushes. Jim's opportunity cost of cutting grass is lower. Jim should cut the grass.
If the government were to implement a law that holds the price of gasoline below the market price, say $2 per gallon, what would the result likely be? a. Deflation b. Additional inflation c. Shortages of gasoline and long lines d. Surpluses of gasoline and short lines
C is correct. If the government were to implement a law that holds the price of gasoline below the market price, the result will likely be shortages and long lines.
15. Inflation is usually caused by a. a decrease in the purchasing power of money. b. an increase in the purchasing power of money. c. an increase in the money supply that exceeds the growth in the quantity of goods and services produced in the economy. d. a decrease in the money supply that exceeds the decrease in the quantity of goods and services produced in the economy.
C is correct. Inflation is caused by an increase in the money supply that exceeds the growth in the quantity of goods and services in an economy—too much money chasing too few goods.
The Great Inflation eventually ended as a result of a. the Federal Reserve increasing the money supply. b. the Federal Reserve decreasing interest rates, which led to increased spending. c. the Federal Reserve increasing interest rates, which led to a severe recession. d. the U.S. Government lowering the price of oil and gasoline through price controls.
C is correct. The Federal Reserve, under the leadership of Paul Volcker, increased interest rates, which resulted in a severe recession. When the people were convinced that inflation had been tamed and that it would remain low and stable, the Federal Reserve started to reduce interest rates. Only then did the recession end and the unemployment rate begin to drop.
The Phillips curve expresses the short-run trade-off between a. inflation and deflation. b. inflation and recession. c. inflation and unemployment. d. unemployment and deflation.
C is correct. The Phillips curve expresses the short-run trade-off between inflation and unemployment: when the inflation rate is high, the unemployment rate should be low; when the unemployment rate is high, the inflation rate should be low.
4. The risk-reward relationship says: a. Risky behavior deserves an award. b. Investors who choose less risky investments are rewarded by earning higher interest rates. c. There is an indirect relationship between risk of loss of principal and expected rate of return. d. There is a direct relationship between risk of loss of principal and expected rate of return. e. Investors who choose risky investments always make more money than investors who choose less risky investments.
D
A debit card is a: a. card for which you pay interest on purchases made. b. convenient form of borrowing with a revolving line of credit. c. card that only allows you to withdraw money from your account at an ATM. d. service offered by banks for a point of sale transaction. It replaces both cash and checks.
D
Before buying a car, you need to make sure you make enough income to afford the monthly payment. As a rule of thumb, your car payment should only be ___% of your net monthly income. a. 35% b. 10% c. 75% d. 20%
D
Compound interest is: a. the price of using someone else's money. b. the original amount of money deposited or invested. c. the part of a person's income that is not spent or used to pay taxes. d. interest computed on the sum of the original principal and accrued interest. e. a method to estimate the number of years it will take for an investment or debt to double in value.
D
If you want to buy goods and services in a foreign country, you must: a. get your passport. b. do nothing, because all countries accept U.S. currency. c. make sure that you have permission from your bank. d. exchange U.S. currency for the foreign country's currency.
D
In a typical rent-to-own agreement, if a renter misses a payment, a. an extra fee is added to the next payment. b. the rental rate increases for the rest of the term of the loan. c. the renter is required to return the item for a partial refund. d. the renter is required to return the item and has nothing to show for the money spent.
D
Overdraft service is: a. Means by which your credit card company lets you know that you have gone over your credit limit. b. Mandatory service provided by credit card companies to prevent consumers from paying interest on balances. c. Mandatory service for consumers provided by financial institutions to generally approve and pay overdraft transactions when the account holder does not have enough funds to cover the transactions. Financial institutions charge a fee for this service. d. Voluntary service for consumers provided by financial institutions to generally approve and pay overdraft transactions when the account holder does not have enough funds to cover the transactions. Financial institutions charge a fee for this service.
D
The production possibilities frontier represents: a. The limit of an economy's production capabilities. b. Full employment. c. The resources available for producing goods and services. d. All of the above.
D
The suggested savings rate for young adults is: a. 50% b. 20% c. 5% d. 10%
D
What are credit cards? a. Free money b. A pre-paid form of credit c. A card used to withdraw money from a deposit account d. A convenient form of borrowing with a revolving line of credit
D
What is the number one cause of overdraft fees? a. Use of credit cards. b. Use of checks without money in the account. c. Use of credit cards without money in the account. d. Use of debit/ATM cards without money in the account.
D
What percentage of borrowers is unable to repay their payday loans? a. 15 percent b. 26 percent c. 73 percent d. 91 percent e. 100 percent
D
Which of the following affects exchange rates? a. Inflation b. Interest rates c. A country's debt and economic stability d. All of the above
D
Which of the following best defines exchange rates? a. An increase in the value of currency b. The direct exchange of goods for goods c. The rate at which countries exchange goods and services d. The price of one country's currency in terms of another country's currency
D
Which of the following cannot be classified as an expense? a. Money you donated to charity. b. Money you owed your brother and finally paid. c. Money you spent going to a movie with your friends. d. Money your aunt Martha paid you for mowing and raking the lawn this week.
D
Which would be an efficient method for countries to produce and trade? a. Countries should produce and trade according to government decree. b. Countries should produce and trade the goods that the people in both countries like more. c. Countries should produce and trade when the opportunity cost of producing a good is low for all trading partners. d. Countries should produce and trade the good for which they have the lower opportunity cost when compared with their trading partner's opportunity cost.
D
Why is it important to balance bank accounts? a. To make sure you did not make a mistake in your record keeping. b. To make sure the bank did not make a mistake in their record keeping. c. To make certain that mistakes do not lead to overdraft fees. d. All of the above statements are true.
D is Correct, A, B and C are all true.
Which of the following statements concerning direct deposit is false? a. Direct deposit is more convenient than being paid with a paper check. b. Direct deposit is safer than being paid with a paper check. c. Direct deposit is more efficient than being paid with a paper check. d. It isn't legal for companies to require employees to use direct deposit.
D is Correct, this is a false statement. It is legal for companies to require employees to use direct deposit.
Cut 1/2 Acre Lawn Trim 8 Bushes Jim 3 3 Bryan 2 1 What are Bryan's opportunity costs of completing each of these tasks? a. Bryan gives up trimming 8 bushes for each ½ acre of grass he cuts, and he gives up cutting 1 acre for each 8 bushes he trims. b. Bryan gives up trimming 3 bushes for each ½ acre of grass he cuts, and he gives up cutting ½ acre for each 3 bushes he trims. c. Bryan gives up trimming 8 bushes for each ½ acre of grass he cuts, and he gives up cutting ½ acre for each 8 bushes he trims. d. Bryan gives up trimming 16 bushes for each ½ acre of grass he cuts, and he gives up cutting 1/4 acre for each 8 bushes he trims.
D is correct! In two hours, Bryan can cut ½ acre or trim 16 bushes. In one hour, he can cut ¼ acre or trim 8 bushes. So if he cuts ½ acre, his opportunity cost is trimming 16 bushes. If he trims 8 bushes, his opportunity cost is cutting 1/4 acre.
. According to Tomato Town's production possibilities frontier: a. Points X and Y reflect combinations of pizza and pasta that can be produced by the economy. b. Points Y and Z reflect combinations of pizza and pasta that are impossible for this economy to attain without changes in technology or additional resources. c. Point X reflects an economy that is not producing as much pizza and pasta as possible and Point Z is unattainable without changes in technology or additional resources. d. Both A and C are correct.
D is correct! Point X represents a production combination that can be achieved but does not use all resources efficiently. Point Y represents a production combination that uses all resources available in this economy. Point Z represents a production combination that is unattainable at present but could be achieved with a technological advance or additional resources.
The FICA tax is used to fund: a. highways, national parks and national defense. b. state highways, state parks, state troopers and public education. c. street lights, fire and police protection and public education. d. Social Security and Medicare.
D is correct. FICA is the Federal Insurance Contributions Act tax. It is used to fund Social Security and Medicare.
3. The Great Inflation was caused by a. falling oil prices and rising food prices. b. high unemployment and increased level of imports. c. shortages of gasoline and food and increased level of imports. d. government policies that increased economic activity and the money supply.
D is correct. Government leaders attempted to achieve a lower unemployment rate through government policies that increased economic activity and the money supply.
Human capital includes which of the following? a. The knowledge that people possess. b. The talent that people possess. c. The skills that people possess. d. a, b and c are all correct.
D is correct. Human capital includes the knowledge, talent and skills that people possess.
Inflation is measured as a. an increase in stock market values over time. b. an increase in the purchasing power of money over a given period. c. an increase in the prices of all goods and services in the economy over time. d. an increase in the price level, as measured by an index, such as the consumer price index (CPI), over a given period.
D is correct. Inflation is measured as an increase in the price level, as measured by an index, such as the consumer price index (CPI), over a given period.
People invest in human capital by: a. going to school. b. pursuing additional training. c. developing skills. d. a, b and c are all correct.
D is correct. People invest in human capital by going to school, pursuing additional training and developing skills.
The inflation rate is the a. price level in the current period. b. change in the gross domestic product (GDP) from an earlier period. c. change in the price level from an earlier period. d. percent change in the price level from an earlier period.
D is correct. The inflation rate is the percent change in the price level from an earlier period.
When calculating the Annual Percentage Rate, it is important to consider a. interest charge. b. amount of loan. c. term. d. all of the above.
D is correct. The interest charge, amount of loan and term must all be considered when calculating APR.
Which of the following is not a step that can help you establish and maintain a good credit history? a. Open a bank account. b. Purchase a cell phone contract and pay it on time and in full every month. c. Make car payments and car insurance on time. d. Open many credit card accounts. e. All of the above steps help establish good credit history.
D is correct. To establish good credit, do not open many credit card accounts.
5. Which of the following is not an advantage to using credit? a. not having to carry cash b. being able to pay for emergencies c. having goods and services while paying for them later d. can cost more than paying cash e. All of the above statements are advantages to using credit.
D is correct. Using credit to buy goods and services often costs more when fees and interest charges are considered. Paying more is not an advantage.
A poor credit score can result in: a. higher interest charges b. difficulty obtaining credit in the future c. difficulty renting an apartment d. difficulty finding a job e. All of the above can result from poor credit history.
E
When rollover fees are included, what have studies found is often the range for the annual percentage rate of payday loans? a. 10 percent to 20 percent b. 20 percent to 40 percent c. 50 percent to 75 percent d. 100 percent to 200 percent e. 390 percent to 780 percent
E
Which of the following is true of productivity? a. The most effective way to continually increase productivity is to work harder. b. More productive workers tend to earn higher incomes. c. An increase in human capital can increase productivity. d. Productivity is measured as the ratio of output per worker per unit of time. e. b, c and d are all correct.
E
Which of the following transactions should not be included in a budget? a. Your paycheck. b. Your cell phone bill. c. Filling your gas tank weekly. d. Your car insurance bill due every six months. e. All of the transactions should be included in a budget.
E
Who pays FICA taxes? a. Employees pay the FICA tax. b. Employers pay the FICA tax. c. The government pays the FICA tax on behalf of workers. d. a and c only e. a and b only
E is correct. Both employers and employees pay FICA taxes.
What happens if you pay more than the minimum balance on your credit card each month? a. The total amount of interest paid will decrease, and the amount of time required to pay off the balance will decrease. b. The total amount of interest paid will decrease, and the amount of time required to pay off the balance will increase. c. The total amount of interest paid will increase, and the amount of time required to pay off the balance will increase. d. The total amount of interest paid will increase, and the amount of time required to pay off the balance will remain unchanged.
A
Which loan is likely to have the highest Annual Percentage Rate (APR)? All of the loans are $500 and include a finance charge of $20. a. Term of 5 days b. Term of 10 days c. Term of 20 days d. Term of 30 days e. Term of 90 days
A
Which of the following is not a credit right? a. Understand that if a deal sounds too good to be true, it probably is. b. Organizations that use credit reports are required to help you understand the report. c. Lenders must notify you within 30 days of their decision to make a loan to you or not. d. Neither the length of the loan, i.e., the term, nor the interest rate may be changed for a fixed-rate loan. e. Creditors cannot make decisions based on sex, national origin, marital status, color, race or age, nor can they ask for this information.
A
Which of the following is not recorded on your credit report? a. your income b. the name of your employer c. late payment history d. a history of credit accounts with names of creditors e. All of the above information is recorded on your credit report.
A
Which of the following statements is an effective budgeting behavior? a. Balancing your bank accounts. b. Spending more than you make. c. Failing to keep track of your cash transactions. d. Forgetting to include taxes when estimating the amount of your paycheck.
A
Which of the following is true of check-cashing services? a. Check cashing services charge hefty fees for cashing paychecks. b. Check cashing services offer all the same services as a local bank. c. Check cashing services insure your deposits up to $100,000. d. Check cashing services allow you to write checks on your deposits.
A is Correct. While the fees may seem small, they add up over time. Banks usually provide this same service for free.
Alphaland and Betaville both produce axes and batons. If they decide to specialize in producing the good in which they have the lower opportunity cost, total production will: a. Increase. b. Decrease. c. Be unaffected. d. There is not enough information provided to determine total production.
A is correct! When producers specialize in producing the good in which they have the lower opportunity cost, total production increases, which allows them to trade their excess production for goods they don't produce.
Number of Baked Goods Decorated in One Hour Cupcakes Cookies Wilson 30 10 Kendall 25 5 Which baker has the lower opportunity cost in decorating cookies? a. Wilson b. Kendall c. They each give up the same amount of cupcakes when decorating cookies. d. There is not enough information available.
A is correct! Wilson gives up decorating 3 cupcakes to decorate 1 cookie. Kendall gives up decorating 5 cupcakes to decorate 1 cookie. Wilson gives up fewer cupcakes, so Wilson has the lower opportunity cost.
A W-4 Form is: a. used by employers to determine the amount of income tax to withhold from employees' earnings. b. the form taxpayers must fill out if they paid more income tax than necessary and want a refund. c. is a form employers must provide to employees shortly after year-end to report annual income and withholding for the employee's tax return. d. a printed statement of the amount that an employee is paid.
A is correct. A W-4 Form is used by employers to determine the amount of income tax to withhold from employees' earnings.
Which of the following describes a healthy budget? a. A healthy budget is one in which income is greater than expenses. b. A healthy budget is one in which expenses are greater than income. c. A healthy budget is one in which the debits are greater than the credits. d. A healthy budget is one in which expenses are high and income does not exist.
A is correct. A healthy budget is one in which income is equal to or greater than expenses.
The phrase, a decline in the average price level over a sustained period, describes which of the following terms? a. Deflation b. Inflation c. Disinflation d. Economic growth
A is correct. Deflation is a situation in which the average price level declines over a sustained period.
In times of high inflation, the Federal Reserve would likely use open market operations to a. sell Treasury securities. b. buy Treasury securities. c. sell stocks. d. buy stocks.
A is correct. During periods of high inflation the Federal Reserve would likely sell Treasury securities to decrease the supply of bank reserves (i.e., money available to lend) and increase the price of borrowing money, which is indicated by an increase in the federal funds rate. A higher federal funds rate influences the interest rate on other loans, which in turn influence the buying decisions of businesses and consumers.
If you are paying fees for late payments or over drafts, your disposable income is being: a. Reduced b. Increased c. Constant d. No relationship between the two
A is correct. Fees reduce the amount of money you have for consumption or savings.
If there is a lien on your car, this means: a. the lender can repossess the car because you did not make the payments. b. you violated the Truth in Lending Act. c. there is something wrong with the car and you are returning it to the dealership. d. the annual percentage rate increased.
A is correct. If you do not make your payments, the lender can put a lien on your car and repossess.
All of the following are costs of inflation, except a. money neutrality. b. menu costs. c. shoe-leather costs. d. redistribution of wealth.
A is correct. Menu costs, shoe-leather costs, and redistribution of wealth are all costs of inflation. Money neutrality is not a cost of inflation; rather, it is an economic theory that states that in the long-run, changes in the money supply cause changes in variables such as prices and wages but not in unemployment or the real—or inflation-adjusted—variables such as real GDP and real consumption.
On average, which of the following people is likely to earn the largest income? a. A person who earns a Master's degree b. A person who earns a Bachelor's degree. c. A person who completes high school. d. A person who drops out of high school.
A is correct. On average, more education leads to higher income.
Which of the following is not one of the three C's of Credit: a. capital b. capacity c. character d. collateral
A is correct. The three C's of Credit are capacity, character and collateral.
Some examples of how a person might spend their disposable income are: a. Food, movies, clothing b. Taxes c. Medicare d. Unemployment/social security
A is correct. These are all categories pertaining to disposable income.
Wages are: a. found by multiplying an hourly pay rate by the number of hours worked. b. a payment people receive for providing natural resources in the market. c. an annual amount paid monthly or bi-monthly for a specified number of hours worked. d. government fees on business and individual income, activities, products or property.
A is correct. Wages are payments earned for hourly work.
