Economy Summer School Exam

Zach is worried about identity theft and comes to you to clarify a few pieces of information. Which of Zach's statements is false?

"I'm under the age of 18 and don't make a lot of money, so I am not a likely target for identity theft."

Uma's renters insurance policy has a premium of $15/month, a deductible of $1000, and a personal property coverage limit of $40,000. Her apartment is burglarized and $5,600 of possessions are stolen or destroyed. How much will Uma pay in order to replace her stuff?

$1,000

According to this paystub, what was the net or take-home pay for this employee for this pay period?

$1,102.98

What is the percentage return on your investment? You bought 10 shares of BigBlueCo for $100/share and later sold all of your shares for $80/share.

-20%

A minor may request a copy of his or her credit report after what age?

14

The table shows information on the supply and demand for bicycles, where the quantities of bicycles are measured in thousands. If the price was $120, what would the quantities demanded and supplied be?

50,000; 36,000

The table shows information on the demand (Qd) and supply (Qs) for bicycles, where the quantities are measured in thousands. What is the quantity supplied at a price of $210?

56,000

I forgot to pay my credit card bill one month. For how long will that payment information show up on my credit report?

7 years

If you could choose just one financial tool to help you avoid damaging financial decisions, which of the following do you think would be most effective?

A balanced budget that you track and update regularly

It's a good idea to have renters insurance in case

A guest is injured while inside your apartment.

The computer market in recent years has seen many more computers sell at much lower prices. What shift in supply or demand is most likely to explain this outcome?

A rise in supply

Which of the following is true about fixed and adjustable-rate mortgages?

Adjustable-rate mortgages have a fixed interest rate for a short period, but then the interest rate fluctuates, which can lead to higher or lower interest rates for the homeowner.

Which of the following statements about opting into your employer sponsored healthcare plan vs. getting an individual healthcare plan is true?

An employer sponsored healthcare plan means that your employer likely pays the majority of your premium.

Which of the following could have a negative impact on your credit score?

Applying for multiple credit cards in a short period of time (e.g., a week)

Which of the following is not an example of safe Internet use?

Archive credit card information in your email.

Melvin is 19 years old and wants to begin establishing a credit history. Which action should he take to meet that goal?

Ask his parents to cosign a credit card or add him as an authorized user on their credit card.

An example of a fixed expense is

Auto insurance

Maxwell, who is 25, asks a bunch of his friends for investing advice. Which of the following is the best advice?

Avoid investing in a single company's stock; you need to diversify your portfolio.

Which of the following is true about checking accounts?

Banks can change the fee policies as long as they put the changes in writing and notify you.

What is the best advice to prevent identity theft?

Be careful with your credit and bank account numbers, create strong passwords, and beware of phishing emails.

You let your friend Yousef borrow your car for the weekend while his is in the shop. He turned on a "No Right on Red" and hit another car. What will happen since Yousef was at-fault?

Because you own the car, you can be held responsible for the accident that he caused.

As Andre reviews his credit card statement, he sees a charge at a gas station, a Walmart, and a McDonalds in Topeka, Kansas, for a total of $55. He lives in Atlanta and hasn't left the state in three years. What should he do?

Call the credit card company immediately and tell them he'd like to dispute the charges. Should have been checked.

Aaron realizes he has a budget deficit of roughly $175 at the end of two months in a row. Which of these options makes the most sense for him to fix his problem?

Cancel his cable TV subscription and go out to dinner three fewer times each month with friends.

"All businesses compete with one another for profit, preventing any one business from gaining power over the entire field." This is a description of

Capitalism

In a market based economy, consumers rely on prices to help them

Choose among similar products.

Chris was not paying attention to the flow of traffic and rear-ended the car in front of him. Both cars have damage, but he doesn't have car insurance. What will most likely happen?

Chris will have to pay out-of-pocket for auto repair and possible medical bills for the person he hit.

If your car is broken into and you have to get new windows, what kind of coverage must you have in order for the insurance company to cover the cost of repairs?

Comprehensive

Why do so many people continue to use payday loans despite the financial risk?

Consumers need quick access to money that is not provided by other financial institutions.

You find an error on your credit report: your credit card account indicates that you are 60 days late on your payment but you have bank records indicating that you have always made on-time payments. What should you do first?

Contact the credit card company to have them fix it.

You're paying your credit card bill and your student loan payment each month, but you're falling behind on your auto loan payment. Which friend's advice could have a negative impact on your credit score?

Debbie says, "Stop making the credit card payment for a few months until you're caught up on the auto loan."

Which statement below offers the best advice for keeping your online or mobile banking secure?

Don't choose easy-to-remember passwords such as welcome or your first name.

A standard homeowners policy will include all of these coverage bundles except

Earthquake and flood

This is commonly considered a flexible expense.

Entertainment

Clyde Cash owned two houses, three office buildings, a Bugatti Veyron, antiques, stocks, and a jet, all worth $25 million. He passed away. His heirs owe the government $9 million in taxes. What kind of taxes do his heirs owe?

Estate Tax

The most fundamental features of a market economy include all of the following except

Evenly distributed property ownership

The most fundamental features of a market economy include all of these except

Evenly distributed property ownership

State citizens voted to add a 75-cent tax to each pack of cigarettes to pay for programs to help people quit smoking. What type of tax is added to each pack of cigarettes?

Excise Tax

What is one difference between HSA and an FSA?

FSA funds must be used up annually, while HSA funds can accumulate year over year.

The advantage of a market economy is

Flexibility in creating and running private businesses by individuals.

You bought 10 shares of stock in StreamingVideoCo for $45 per share. Two months later you sold the ten shares of stock for $80 per share. What was your profit or loss on StreamingVideoCo stock? Assuming that StreamingVideoCo didn't pay a dividend during that period.

Gain of $350

How is long-term disability insurance different from health insurance?

Health insurance only covers the cost of healing the injury/illness, while long term disability covers a percentage of your income while you are away from work due to the injury/illness.

What are the average monthly costs for homeowners and renters insurance across the US?

Homeowners= $100, Renters= $15

David wants to change his daily habit of buying a $5 coffee and save more money. Which of the following should he do?

Identify what triggers his habit and what reward he is trying to satisfy.

Jake got his paycheck today. He worked 40 hours at $20 per hour. His gross pay was $800, but the amount of his paycheck was only $623.15. What type of tax was taken from Jake's paycheck?

Income/Social Security/Medicare Tax

Which of the statements below best describes the relationship between risk and return when considering an investment?

Investors expect to earn a lower return when they invest in a low risk asset like a U.S. Treasury Bond.

Detractors of capitalism assert that

It exploits a large portion of society for the sake of a small group of wealthy individuals.

Frank and Jasmere are both shopping for a new car. They are looking for a $20,000 loan to pay for the new car that they will pay back over a five-year period. Frank has a credit score of 730 and Jasmere has a score of 600. Which of the following statements is true?

Jasmere's monthly payment on the loan will be about $100 more than Frank's payment.

Which statement best describes why payday loans are sometimes referred to as "predatory lending?"

Lenders "prey" on low-income borrowers who have little to no other options for obtaining a loan

Which of the following auto insurance coverages are you required to carry in 49 out of 50 states?

Liability

Which of these costs would be the most difficult to adjust if you were looking to reduce your expenses?

Loan payment on a new car.

What is the opportunty cost of not going to college?

Low unemployment

Which best describes the Debt Snowball method for paying off debt?

Make the monthly minimum payments on all your debts and put any extra cash toward the debt with the lowest balance.

After getting into a car accident, you should immediately

Move you and your car to a safe area if possible and check to see if anyone is hurt.

Margaret opened her mail this morning and is shocked to see her total hospital bill for her recent injury. She's worried she can't afford to pay this bill. What is the best thing she can do?

Negotiate a repayment plan in which she can pay the bill back in installments.

As a young adult, all of the following are good strategies for building credit, except

Open a checking account, and start using a debit card.

What are the two most important factors in calculating your credit score?

Payment history and amounts owed.

The purpose of the Sherman Anti-Trust Act was to

Prevent businesses from conspiring to limit production or trade.

If you think you've been the victim of a fraud or scam, which of the following is the best first step?

Review your statements, online account, or credit report to locate suspicious activity. Call the company to report problems as soon as you see them.

Which of the following is true about scarcity?

Scarcity affects everyone.

Nancy wants to take steps to better protect her personal information. Which of the following is a bad idea?

She creates one really strong password that no one knows and uses it for all of her financial accounts.

Which statement below is most accurate about how emotions factor into investment decisions?

Since the emotional pain of losing money is so great, many investors respond to drops in the stock market by selling their shares.

One of the benefits of capitalism is

Social harmony is created when every individual works separately to pursue their self-interest.

If you are having trouble making auto loan payments, and are really following a tight budget, which recommendation below represents the worst advice?

Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control.

Spending the evening watching her favorite musician perform.

Taylor had the option to go see her favorite musician playing at a local venue tonight. She decided not to go to the concert in order to save money. By deciding not to go, what was the opportunity cost?

Why is it important to be extremely careful when completing your 1040 form?

The 1040 form determines whether you owe additional taxes or are entitled to receive a refund from the government.

What is the difference between a declaration page and an agreement when referring to your homeowners insurance policy?

The declaration page outlines the premiums, deductibles, and coverage limits, while the agreement provides details on exact coverage.

Who is responsible for the federal budget?

The president

If someone gets health insurance through Medicaid, that means

Their premium is likely covered by the Federal and/or state government.

Based on this picture from 1973, why were there a long line of cars?

There was a high demand for gas due to the gas shortage.

Which of the following is a function of households in the market economy?

They supply firms with the factors of production.

You overhear your cousin talking about the importance of creating and sticking to a budget. Which of the following reasons he gives below is actually false?

Using a budget can qualify you for special discounts at your favorite stores.

You have a credit card and want to know the best way to use it to boost your credit score. Which step will have the greatest impac

Using less than 30% of the credit limit on your card and paying it off in full every month by the due date.

You are starting your first job and you are asked to complete some paperwork on your first day. Which form will determine how much money is withheld from your paycheck for federal and state income taxes?

W-4

Which of these represents a potential consequence of neglecting to pay your credit card or loan debts?

Wages or tax refunds can be garnished.

Which of the following is a bad budgeting strategy to use if you want to save money at the grocery store?

When comparing similar products, focus on the price only.

When do you start paying taxes?

When you make more than the minimum income requirement

You are putting together your first post-graduation budget. Your take-home pay will be $2,500 per month. You estimate that your monthly costs to be rent of $900, car related expenses to be $550, entertainment of $200, food expense of $250, cable bill of $75, mobile phone of $100, student loan payment of $400 and other expense of $150. How would you describe your budget after analyzing all of your income and expenses?

You have a deficit of $125.

You deposit $1,000 into a 2 year Certificate of Deposit (CD), which earns 2% interest per year. During those 2 years, the inflation rate runs 3% per year. Which statement is accurate regarding what you can purchase at the end of the CD's term?

You have less purchasing power because the inflation rate is greater than the interest you are earning.

Which of the statements below is true about filing your taxes, assuming your only income comes from the salary you earn at your job?

You must file your tax return by April 15th of the following year or request an extension by that date.

Which of the following is a sign that you have a budget deficit?

You overdraw your checking account on a consistent basis (with a $34 cost per overdraft)

Which of the following best describes what Two Factor Authentication (2FA) is?

You type in your account password on your laptop and are prompted to enter a one-time code you receive via text message.

When signing up for a new checking account, you answer "yes" to receive overdraft protection. On this day, you have $10 in your account and go out and use your debit card to buy lunch for $12, a movie ticket for $12, and dinner for $15. What is likely to be the outcome resulting from these transactions?

You will likely be charged an overdraft fee for one or more of the transactions and also will need to repay the bank for the amount overdrawn ($29).

All of the following represent a compelling reason to pay a higher insurance premium except

You will receive a higher level of customer service and better care.

Going to an in-network doctor is a good idea, because

You will save on overall costs when compared to seeing an out-of-network doctor.

How can your credit score impact your financial situation?

Your credit score can determine whether you are approved for a loan and what the interest rate on that loan will be.

Each of the following factors affect your monthly auto insurance premium except

Your local auto shop's customer service reviews.

What is one benefit of selecting an income-based repayment plan for your student loans?

Your monthly loan payment will be set based on your income, so that you're not paying more than 20% of income toward your loans.

If you feel your insurance company is not upholding your policy correctly and you can't resolve it directly with the company, you will likely have the most success by contacting

Your state's Department of Insurance or Insurance Bureau

How frequently can you request a free copy of your credit reports?

every 12 months

The shorter your term length, the _____ your monthly payments, and the _____ the total interest you will pay.

higher, lower

You invest $1,000 in a stock market index fund that earns 8% compounded over a 10 year period (a simplified example since stock market returns vary year to year). How much would your investment be worth after this 10 year period?

more than $2,000