Fin 300

A good financial plan completed when one is in their 30s will typically last a lifetime. a. True b. False

FALSE

"1 want to accumulate a comfortable retirement fund" [would | would not] be a specific financial goal.

a

An adequate emergency fund should last [2-3 months | 6-9 months].

b

Having numerous credit cards can [improve | hurt] your credit score.

b

A primary determinant of your quality of life is a. a tax bill. b. income potential. c. wealth. d. tangible property. e. motivation.

c

Rob requests that a GPS system be added to his new care at an additional cost. The GPS system provides Rob a. propensity to consume. b. wealth. c. additional utility. d. a financial asset. e. none of these.

c

The four stages of an economic cycle would not include a. peak. b. contraction. c. stagnation. d. expansion. e. trough.

c

When investing, you should try to time the market [to buy when it's low | to sell when it's high].

c

[Vacations | Education] would be considered a necessity of life.

c

Your level of formal education is a [controllable | non controllable] factor that has a considerable effect on your income.

controllable

As the rate of inflation increases, a. pay checks decrease. b. interest rates decrease. c. the cost of living goes down. d. purchasing power of a dollar increases. e. retirement plans have more difficulty meeting their goals.

d

Generally, as income rises, the average propensity to consume a. increases. b. stabilizes. c. drops to zero. d. decreases. e. becomes erratic.

d

The most important financial planning for young people concerns a. retirement. b. insurance. c. investment. d. career. e. taxes

d

What policies can the government utilize to help stabilize the economy? a. Price stabilization policy b. Monetary policy c. Fiscal policy d. b and c e. a, b, and c

d

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. A stronger economy leads to [higher employment | lower employment].

A

The average American starting a career today can expect to have at least [seven | ten] jobs during his/her lifetime.

B

Becky graduated with a master degree in Personal Financial Planning. After working two years in a small financial planning firm, Becky earns $60,000 annually and saves $10,000 a year. What is her average propensity to consume? a. 83.3% b. 75.7% c. 16.7% d. 25.5% e. 95.5%

a

Decreasing taxes stimulates the economy. a. True b. False

a

Family financial goals should be a. realistically attainable. b. individually determined. c. set once for a lifetime. d. very general in nature. e. reserved for retirement planning.

a

Following an economic trough, the economy will often enter a period of [expansion | contraction].

a

Money can be withdrawn from tax-deferred retirement accounts without penalty beginning at age [59 1/2 | 62 1/2].

a

Mutual funds are examples of financial assets. a. True b. False

a

Nearly 35% of Americans say retirement planning is their most pressing financial concern. a. True b. False

a

Sam and Lele are in their late 20s with 3 young children. Their most important financial planning concerns would probably include all of the following except a. retirement and estate planning. b. asset acquisition planning. c. employee benefit planning. d. liability and insurance planning. e. savings and investment planning.

a

The average [self employed | retired] household has higher income.

a

The average income of household heads increase until age [55 | 65] then income starts decreasing.

a

The financial crisis of 2008 and 2009 is best characterized as a [recession | depression].

a

The longer you wait to begin retirement planning, the less you will likely have in your retirement fund. a. True b. False

a

The most effective way to achieve financial objectives is through financial planning. a. True b. False

a

Two key indicators of economic activity in the U.S. are production levels and [employment levels | cost of living].

a

Typically, higher levels of education are rewarded with higher income over the lifetime. a. True b. False

a

Wealth can be defined as the total value of all the things you own. a. True b. False

a

Your house is an example of a tangible asset. a. True b. False

a

A personal computer could not be used to a. analyze investment possibilities. b. store and retrieve financial information efficiently. c. prepare detailed budgets. d. keep insurance coverage inventories. e. make financial decisions.

e

Businesses provide a. stores. b. labor. c. money payments. d. land and capital. e. goods and services.

e

Ideally, retirement planning should begin a. when the last child has left home. b. during the year before retirement. c. as soon as the mortgage is paid off. d. when you get married. e. None of these choices are correct.

e

The primary reason people use financial advisors is a. saving for their children's college education. b. unhappiness with results of managing their own finances. c. tax issues. d. estate and inheritance planning. e. retirement needs.

e

Which of the following is NOT a common misconception about financial planning? a. Retirement is a lifetime away. b. A little credit card debt is fine. c. You don't need a budget if you have a general idea of what you earn and spend. d. A professional financial planner is an unnecessary expense. e. A second income doesn't add as much as expected to the bottom line.

e

Which of the following questions should you ask yourself when developing your financial goals? a. What do I like to buy? b. How important is money to me? c. Does money make me feel secure? d. Am I a risk taker? e. All of these choices are correct.

e

A person making $35,000 and spending $30,800 has an average propensity to consume of 80%. a. True b. False

false

About 65% of Americans believe that money is freedom. a. True b. False

false

Average propensity to consume refers to how much of your money you plan to save in your financial plan. a. True b. False

false

High interest rates after the financial crisis of 2008-2009 reflect the Federal Reserve's efforts to tighten, or reduce, the money supply. a. True b. False

false

Inflation generally has little effect on personal financial planning. a. True b. False

false

Over the long run, gaining an extra two percent on an investment makes little difference in earnings generated. a. True b. False

false

Reducing the money supply stimulates the economy. a. True b. False

false

Saving $3,000 for a large, flat-screen TV within the next 3 years is an example of a short-term goal. a. True b. False

false

The financial crisis of 2008 and 2009 was the first depression the U.S. has experienced in 75 years. a. True b. False

false

The need for financial planning declines as your income increases. a. True b. False

false

Wealthy people have a higher average propensity to consume. a. True b. False

false

Accumulating wealth for later years is called estate planning. a. True b. False

true

Current consumption affects future consumption. a. True b. False

true

Defining financial goals is an important first step in personal financial planning process. a. True b. False

true

Effective financial plans are both economically and psychologically sound. a. True b. False

true

Financial assets are paper assets, such as savings accounts and securities. a. True b. False

true

Two persons with equal average propensities to consume will not necessarily have equal standards of living because of differences in income. a. True b. False

true