Personal and Family Finance Final
Economic systems are incredibly complex. What is TRUE statement about economic systems? A) Ancient humans engaged in early economics by trading and selling of goods. B) Economies have existed for only the past few centuries. C) An individual who is working, spending, and saving does not play a role in the economy. D) The bartering system has never been a successful way of trading goods and services.
A) Ancient humans engaged in early economics by trading and selling of goods.
Carson lost his job as a construction worker when his company had to make cuts. How might Carson's job loss affect his local community? A) Carson will contribute less money to local taxes. B) The local community will not need to provide any services for Carson. C) Carson will have to pay even higher taxes to his local community. D) One person losing a job will not have an impact on a local community.
A) Carson will contribute less money to local taxes.
What is likely to be TRUE about making financial decisions as people get older? A) Financial decisions become bigger and more complex. B) Making decisions is easier as there are fewer risks involved. C) There are fewer major decisions to make. D) Financial situations will be simpler with fewer consequences.
A) Financial decisions become bigger and more complex.
Alicia has a very simple tax return and some degree of tax knowledge. She wants to file taxes without spending any extra money. What is her BEST option for filing taxes? A) Independently prepare her taxes. B) Prepare her taxes using an electronic tax program. C) Hire someone to prepare her taxes. D) Choose to not file taxes this year.
A) Independently prepare her taxes.
The federal government established a law called the Fair Labor Standards Act in 1938. What does this law do? A) It establishes a federal minimum wage for all workers. B) It makes sure that all workers are given a safe working environment C) It provides men and women with equal pay. D) It requires that all companies provide workers with health insurance
A) It establishes a federal minimum wage for all workers.
In a market economy, competition is a crucial requirement. What is one benefit to fostering competition in an economic system? A) It gives consumers more choices in the quality and price for things they want to buy. B) It causes higher prices, so businesses make a higher amount of profits. C) It limits the freedom companies have to create new products. D) It never requires any outside assistance from the government.
A) It gives consumers more choices in the quality and price for things they want to buy.
Kato is getting ready to sign a complicated contract at work. What is the BEST advice for him? A) Obtain an exact copy of the contract at the time it is signed. B) Don't waste everyone's time by reading every single word. C) Lawyers are not helpful when dealing with contracts. D) Leave blank spaces empty, as they will be filled in after you sign the contract.
A) Obtain an exact copy of the contract at the time it is signed.
Raymond's grandfather recently passed away. He left Raymond $1,000,000 in his will. Raymond's lawyer tells him not to spend all $1,000,000 because he will owe some of it to the government. Why is this MOST likely true? A) Raymond will have to pay inheritance tax. B) Raymond will have to pay real estate property tax. C) Raymond will have to pay excise tax. D) Raymond will have to pay estate tax.
A) Raymond will have to pay inheritance tax.
Roberto is self-employed. He worries that he won't pay the right amount of taxes each year. He has decided to try to figure out what he will owe and pay a little bit to the government quarterly so he won't be too far off when he files his tax return. What method does this MOST likely demonstrate? A) estimated payments B) filing taxes C) auditing D) withholding
A) estimated payments
Imagine that your country takes in $100 million each year in tax money but chooses to spend $500 million on various services it provides. What type of stance does your country take on fiscal policy? A) expansionary stance B) contractionary stance C) economic stance D) neutral stance
A) expansionary stance
Sarah got a big raise at her job, so she bought herself a new truck. She knew it was a splurge, but she figured with her extra money coming in, it would be manageable. Unfortunately, her company had to cut her job the very next month, leaving Sarah with a new truck and no extra money to pay for it. What does this scenario BEST represent? A) income risk B) interest rate risk C) personal risk D) inflation risk
A) income risk
Using the amount of his current paycheck, Miguel created a series of financial goals and strategies. Which type of financial risk might this cause for him in the future? A) income risk B) interest rate risk C) personal risk D) inflation risk
A) income risk
What is the term for the date when the money from a CD account can be withdrawn? A) maturity date B) end date C) completion date D) withdrawal date
A) maturity date
Some countries use an economic model where they incorporate a bit of market-driven business with some governmental oversight into their economy. What type of economy is this considered to be? A) mixed economy B) laissez-faire economy C) planned economy D) free enterprise economy
A) mixed economy
Patrice and Patrick are twins. They sit down to discuss their college plans with their parents. If both choose an in-state school, their parents will be able to cover the entire tuition costs. If either chooses an out-of-state school, there won't be enough money to cover both tuitions. What approach is the family taking to solve the situation? A) shared decision-making B) personal risks C) financial planning D) opportunity cost
A) shared decision-making
Jeff needs car insurance. He is debating between purchasing liability insurance or a comprehensive policy. What is one TRUE statement about these options that can help him make an informed decision? A) Liability insurance offers to replace the car if it is destroyed in an accident. B) A comprehensive policy is generally required if a bank helps you purchase a vehicle. C) Liability insurance offers coverage when there is a theft. D) A comprehensive policy usually requires a lower premium than liability coverage.
B) A comprehensive policy is generally required if a bank helps you purchase a vehicle.
What is TRUE about economic resources? A) Natural resources are limited, but manufactured resources are unlimited. B) All economic resources are limited. C) Company profit won't be impacted by the amount of resources used. D) Land is always limited, but labor is not limited.
B) All economic resources are limited.
Tim has a house worth $250,000. He has installed a $100,000 aquarium in his basement because he is obsessed with fish. His regular homeowner's insurance doesn't cover home aquariums, so his insurance agent is writing a supplemental policy to help him get the coverage for the aquarium. What is this known as? A) an exclusion B) a rider C) a deductible D) a consideration
B) a rider
When creating their will, Steph and Freida had a difficult time deciding who would carry out its instructions. What person were they struggling to designate? A) a guardian B) an executor C) a power of attorney D) an insurer
B) an executor
What is the term for the broad types of investments with common characteristics? A) asset allocations B) asset classes C) mutual funds D) dividends
B) asset classes
In which year did the United States begin collecting federal income tax? A) 1776 B) 1861 C) 1913 D) 1955
C) 1913
What percent of lottery winners end up with serious financial problems? A) 30 B) 50 C) 70 D) 90
C) 70
What is a TRUE statement about who is affected by the stock market? A) No one is affected by the stock market. B) Only big companies are affected by the stock market. C) All people are affected by the stock market. D) Only investors are affected by the stock market.
C) All people are affected by the stock market.
Devon would like to invest in bonds but he is only familiar with investing in stocks. What is the biggest difference between the two? A) Bonds are generally high risk. B) Bonds are generally short-term investments. C) Bonds have fixed maturity dates. D) Bonds provide constant access to your investment money.
C) Bonds have fixed maturity dates.
Which of the following is NOT an aspect of capitalism? A) resources B) capital C) cooperation D) labor
C) Cooperation
Yolanda and Chris have been doing well developing their financial plan. They have looked at their current resources, identified short- and long-term financial goals, and identified potential goals. They are not sure what they need to do next. What is the BEST action for them to take in order to continue the financial planning process? A) Ask other young married couples about their own financial troubles. B) Stop worrying about small financial decisions and start focusing on the big financial decisions. C) Decide on a course of action and begin implementing their chosen paths to the goal. D) Make several emotional financial decisions by acting on their impulses.
C) Decide on a course of action and begin implementing their chosen paths to the goal.
What does FDIC stand for? A) Financial Deposits and Investments Corporation B) Finance Data Investigation Corporation C) Federal Deposit Insurance Corporation D) Federal Debts, Investments, and Credits
C) Federal Deposit Insurance Corporation
Georgeanna died, but her life insurance company refuses to pay the life insurance claim. They say the policy is invalid now. Why is this MOST likely to be the case? A) Georgeanna never created a living will. B) Georgeanna never designated power of attorney to anyone. C) Georgeanna committed suicide. D) Georgeanna died in her own home and not in a hospital.
C) Georgeanna committed suicide.
Cynthia has had a very complicated financial year. She worries that her tax return will be extremely complicated this year as well. She thinks she will have numerous random deductions and credits that she fears she might miss. What is her BEST option for filing taxes? A) Prepare her taxes on her own. B) Prepare her taxes using an electronic tax program. C) Hire someone to prepare her taxes. D) Choose to not file taxes this year.
C) Hire someone to prepare her taxes.
Sergio and Isabella are currently working full-time jobs. They are about to have their first child and are trying to decide if they are both going to keep working. What disadvantage will likely face if they choose a dual income option? A) They will have a lower amount of dispensable income. B) They will have a greater amount of financial income. C) They will have a higher amount of childcare expenses. D) They will have more time to spend with their new baby.
C) They will have a higher amount of childcare expenses.
Renee and Daniel, who are currently both working full-time jobs, are preparing for Daniel's mother to move in. As his mother will require a great deal of care, they are trying to decide if they are both going to keep working. What benefit will they MOST LIKELY experience if they choose a single-income option? A) They will have more disposable income. B) They will have a greater amount of financial income. C) They will have more time to manage his mother's care. D) They will have less time to spend with their new baby.
C) They will have more time to manage his mother's care.
Paula and Harlow have three children. When creating their will, they had to name the person they wanted to raise their children if they both died. Who did Paula and Harlow have to choose? A) a power of attorney B) an executor C) a guardian D) an insurer
C) a guardian
Joseph wants to invest money for a very long time. He doesn't need the money back within any specific timeframe. He would like a very low-risk investment because he doesn't want to lose any money. Which type of investment will BEST fit Joseph's needs? A) money market mutual fund B) certificate of deposit C) bond D) 401k
C) bond
What is an example of a non-depository financial institution? A) commercial bank B) credit union C) brokerage firm D) stock-held savings institution
C) brokerage firm
Ian is interested in purchasing bonds, but he is looking for bonds that aren't related to the government. Which type of bonds would you suggest he purchase? A) treasury bonds B) municipal bonds C) corporate bonds D) general obligation bonds
C) corporate bonds
Marcus loves a certain candy bar that he thought was only sold in Spain. The other day, he saw that the candy bar is now available in his local grocery store. What process helped bring the Spanish candy bar to America? A) recession B) foreclosure C) global trade D) monopolizing
C) global trade
Monica has been audited by the IRS. She is required to report to an IRS office to clarify items from her tax return. Which type of audit is Monica experiencing? A) deduction audit B) correspondence audit C) office audit D) field audit
C) office audit
Hernando lives in a county where everyone pays the same amount of taxes no matter their income. Which type of tax system is Hernando's country MOST likely using? A) inheritance B) progressive C) regressive D) real estate property
C) regressive
What is one example of a planned economy? A) laissez-faire economy B) free enterprise economy C) socialist economy D) market economy
C) socialist economy
What is TRUE about estate planning? A) It is better to wait until you are over the age of 30 to begin planning. B) The best time to start planning is when you are suffering from a long-term illness. C) It usually increases the cost of settling an estate D) It helps ensure your possessions are distributed appropriately.
D) It helps ensure your possessions are distributed appropriately.
Lavonda's very wealthy grandmother recently died. After her death, everything she owned totaled $1,000,000. However, her family was only given $700,000. What MOST likely happened to the other $300,000? A) It was used to cover income taxes. B) It was used to cover sales taxes. C) It was used to cover excise taxes. D) It was used to cover estate taxes.
D) It was used to cover estate taxes.
Ian walks into a depository institution and says he wants to open an account. He asks for details about the institution. The employee tells Ian that they offer many services such as checking and savings accounts, mortgages, personal loans, and debit cards. Ian asks if this institution is a non-profit, and the employee tells him that they are a for-profit organization. Which type of institution is Ian considering for his account? A) credit union B) web-only financial institution C) brokerage firm D) commercial bank
D) commercial bank
T-bills are offered in what monetary increment? A) 1 cent B) $1 C) $10 D) $100
D) $100
Jennifer has recently found a new job at a local architectural firm. They have offered her a chance to invest money for her retirement. For every 6 percent Jennifer invests from her salary, her company will fund 3 percent. What type of investment does this describe? A) money market mutual fund B) certificate of deposit C) bond D) 401k
D) 401k
When making a financial decision, what should be left out of the process whenever possible? A) emotion B) shared decision-making C) financial plans D) possible risks
A) emotion
Lavonda wants to become a famous singer. She meets with an agent in New York City who tells her that he will represent her in return for 10 percent of everything she earns. Lavonda agrees, and they write down these shared expectations and demands. What type of written agreement does this describe? A) contract B) power of attorney C) living will D) insurance policy
A) contract
Christie operates a small cookie business. What type of income does she earn? A) earned income B) unemployment income C) investment income D) passive income
A) earned income
Patrice is trying to decide if she needs a checking account, a savings account, or both. She asks for your advice. What TRUE statement about these accounts can you share with Patrice? A) Some savings and checking accounts have a minimum balance requirement and will charge a fee if the balance falls below this amount. B) Savings and checking accounts are usually not available at web-only financial institutions. C) Savings accounts generally earn no interest on the balance of the account. D) Checking accounts generally earn a lot of interest on the balance of the account.
A) Some savings and checking accounts have a minimum balance requirement and will charge a fee if the balance falls below this amount.
In the United States, if someone is unable to file by the tax deadline, they can file an extension, but any taxes due must still be paid by the deadline to avoid penalties. A) True B) False
A) True
Speculative investments are high-risk investments with the possibility of high returns in a short period of time. A) True B) False
A) True
The interest rates for treasury notes are greater than for T-bills because of the longer maturity dates. A) True B) False
A) True
There are two means for achieving financial goals—you either need to increase your savings or reduce your spending. A) True B) False
A) True
What is the Internal Revenue Code? A) a collection of tax laws, their interpretations, and federal tax rulings B) a list of tax brackets and the percentages each person must pay C) a book used solely by tax accountants to help people complete their filings D) a passcode that citizens must have to file their taxes online
A) a collection of tax laws, their interpretations, and federal tax rulings
Derrick recently got married and has a small child. For the first time in his life, he worries about what will happen to his home and his other property after he dies. He also wants to make sure his child is taken care of if he dies. What should Derrick prepare? A) a will B) a power of attorney C) a health insurance policy D) a consideration
A) a will
Arnold opens a cake decorating company. He purchases decorating tools and ingredients. These are both examples of which type of expenditure? A) capital B) labor C) entrepreneurial ability D) land
A) capital
What does laissez-faire mean? A) to let be B) to buy C) to control D) to contribute
A) to let be
Cameron is trying to decide whether to invest in real estate or in preferred stocks. What is TRUE about preferred stocks and real estate that might convince Cameron to choose preferred stocks over real estate? A) The initial investment for preferred stocks is usually higher than real estate, but the returns are higher as well. B) Cameron will get a fixed dividend each year on preferred stocks, which provides consistent income, but real estate does not offer this. C) Preferred stocks are almost always risk-free whereas real estate is the riskiest investment vehicle. D) It takes a few days to see a return on real estate investment but preferred stocks can produce a return in just a few hours.
B) Cameron will get a fixed dividend each year on preferred stocks, which provides consistent income, but real estate does not offer this.
Which statement about economic resources is CORRECT? A) Economic resources include only money. B) Economic resources include land, capital, entrepreneurial ability, and labor. C) Economic resources exist only at the individual level. D) Economic resources are always controlled by the government.
B) Economic resources include land, capital, entrepreneurial ability, and labor.
Economists define capital as money used to start a business. A) True B) False
B) False
In the United States, only five states currently charge sales tax on purchases. A) True B) False
B) False
One of the basic principles of the study of economics is that society and its individuals have limited wants. A) True B) False
B) False
People who don't work at all do not affect the economy. A) True B) False
B) False
Tariffs are used to encourage global trade between two countries. A) True B) False
B) False
Treasury bonds mature in 20 years. A) True B) False
B) False
You are renting a house, and the lease requires the landlord to fix any problems within 10 days. You inform the landlord that the kitchen sink is leaking. The landlord doesn't fix the sink within 10 days. What has the landlord done? A) She has lost her power of attorney over the lease. B) She has violated the terms and conditions of the lease. C) She has offered a consideration. D) She has participated in a consensus ad idem.
B) She has violated the terms and conditions of the lease.
What is an example of an inflation risk? A) A person's income may drop. B) The price of an item can rise or fall. C) The rates of interest could rise or fall. D) A person might become ill or have another major problem arise.
B) The price of an item can rise or fall.
Jeff and Casey, who are currently both working full-time jobs, are about to have their first child. They are trying to decide if they are both going to keep working. What benefit are they MOST likely to experience if they choose a dual income option? A) They will have a lower amount of childcare expenses. B) They will have a greater amount of financial income. C) They will have less disposable income. D) They will have more time to spend with their new baby.
B) They will have a greater amount of financial income.
Yosef recently bought stock in a company. After his purchase, the company had a horrible year and lost a lot of money. What is MOST likely to happen as a result of this performance? A) Yosef will get a share of the profit. B) Yosef will lose money from his initial investment. C) The business will buy back all of Yosef's stock. D) Yosef will be forced to pay the company so it can survive.
B) Yosef will lose money from his initial investment.
Interest rate risks would be most relevant to what purchase? A) airline tickets B) a house C) a sweater D) patio furniture
B) a house
What is the legal document detailing the type of medical care a person wishes to receive in the event they become incapacitated due to a physical or mental illness? A) simple will B) living will C) life insurance policy D) consideration
B) living will
Which financial service offers credit opportunities that can be short-term or offered over an extended period of time and are used for big things like home mortgages, automobiles, home improvements, education, medical expenses, or travel? A) payment services B) loans C) savings D) financial planning
B) loans
What type of service do pawnshops generally offer? A) check cashing B) loans on possessions C) high interest savings accounts D) life insurance
B) loans on possessions
The Gregor family installed a pool in their backyard but refused to put in a fence. While the Gregors were on vacation, a 10-year-old boy jumped in their pool and was injured. The boy's family will MOST likely sue the Gregors for what? A) coverage B) negligence C) fraud D) consideration
B) negligence
In the New York Stock Exchange, traders are on the floor verbally submitting their offers. What type of stock market is this considered to be? A) neutral B) physical C) virtual D) rational
B) physical
In the United States, people are sorted into different tax brackets so that they pay differing amounts of taxes based on their income level. Which type of tax system does this BEST demonstrate? A) regressive B) progressive C) proportional D) flat
B) progressive
Analisa wants to save her money in a place where she can have access to it anytime in case of an emergency. Which option BEST fits Analisa's wishes? A) CD B) savings account C) bond D) stocks
B) savings account
Amanda submitted her taxes, but someone from the IRS called her because they want to talk more about her tax return. What is Amanda MOST likely experiencing? A) estimated payment B) tax audit C) tax deduction D) exemption
B) tax audit
Who owns mutual savings institutions? A) the stockbrokers who buy and sell shares B) the individuals who deposit money in the institution C) the US government D) the FDIC
B) the individuals who deposit money in the institution
What is the term for the idea that you can never recover more than the loss is worth, regardless of the amount of insurance that you have? A) consensus ad idem B) the principle of indemnity C) negligence D) risk classification
B) the principle of indemnity
What is the main purpose of government regulations of financial institutions? A) to influence spending in different industries B) to protect consumers and their money C) to create market stability D) to make a profit for the government
B) to protect consumers and their money
Thomas hates physically going to a bank. He wants to be able to open an account and start a banking relationship without ever leaving his house. What is the BEST banking option for Thomas? A) credit union B) web-only financial institution C) savings and loan institution D) commercial bank
B) web-only financial institution
A capitalist economy is MOST typically associated with what area of the world? A) Asia B) South America C) North America D) Africa
C) North America
What is TRUE about a capitalist society? A) Three things are needed: government regulation, tariffs, and bartering. B) Businesses are owned by the government but run by the citizens C) People make an income from wages and profits. D) Government involvement is prohibited by law.
C) People make an income from wages and profits.
Ricky knows nothing about investments. He has some money to invest but isn't sure how much risk he should take. When examining safety and risk in investments, what would experts recommend that Ricky consider? A) Ricky should always assume more risks no matter what because the returns will always be greater in the long run. B) In investing, there are no wrong choices; most investments are safe and risk-free if you do your research. checkCorrect C) Ricky's potential gains should be proportionate to the amount of risk he decides to take in his investments. D) If Ricky is nearing retirement, he can afford to make riskier choices because he is more established in his life
C) Ricky's potential gains should be proportionate to the amount of risk he decides to take in his investments.
Imagine that there are currently three major cell phone service providers available in the United States. The largest one has enough money to buy out the other two companies and make one giant company. What is MOST likely to happen if the largest company attempts to buy out the other two companies? A) The government will approve this monopoly. B)Customers will have more choice in their service provider. C) The new, large company can control all prices and services provided. D) OSHA will step in and make sure that this merger is not approved.
C) The new, large company can control all prices and services provided
Which statement BEST argues that stock markets can be good for society? A) The stock market helps people earn money without having to pay any taxes on their income. B) The government requires all companies to participate in the stock market C) The stock market allows individuals to invest money and create more money. D) Investing in the stock market involves no risk.
C) The stock market allows individuals to invest money and create more money.
According to economists, all humans have their own "rational self-interest." What does this mean? A) They want to help others rather than help themselves. B) They will only make rational and logical decisions about purchases. C) They want to benefit themselves as much as possible. D) They will only make a purchase if it is involving their top three interests.
C) They want to benefit themselves as much as possible.
What is TRUE about permanent life insurance? A) There is no value to the insurance above the death benefits. B) The cash value of the insurance remains fixed. C) It only covers a specific period of time. D) The cash value of the insurance increases as the premiums accumulate.
D) The cash value of the insurance increases as the premiums accumulate.
What is TRUE about taxes? A) Most citizens want to pay the highest amount possible. B) Taxes benefit the government, but they do not benefit the citizens. C) Taxes benefit the citizens, but they do not benefit the government. D) The tax money comes out of the citizen's earned income and overall wealth.
D) The tax money comes out of the citizen's earned income and overall wealth.
What is TRUE about credit unions? A) They are not insured by the government. B) They do not have any government regulations. C) They only offer savings accounts. D) They are owned by members.
D) They are owned by members.
After Joe and Stephanie placed an offer on a house, the realtor came back to tell them they had Consensus ad idem. What does this MOST likely mean for Joe and Stephanie? A) They should find a new realtor. B) They must look for a different home. C) They have to make a better offer. D) They have an accepted offer.
D) They have an accepted offer.
Trina wants to start a company that makes clothing. She has a lot of ideas, but she doesn't have any sewing machines to use to make the clothes. Which category of economic resource does she require? A) labor B) entrepreneurial ability C) land D) capital
D) capital
How do brokerage firms primarily make their profits? A) consumer deposits B) government deposits C) dividends D) fees or commissions on sales or transfers
D) fees or commissions on sales or transfers
Marta and Miguel are being audited by the IRS. An IRS agent is visiting their home, so they can have access to all of their records. Which type of audit does this describe? A) deduction audit B) correspondence audit C) office audit D) field audit
D) field audit
Roger thinks it would be fun to own a part of a major company. He would like the opportunity to buy shares of ownership in a company. How does an individual do this? A) give money to charity B) pay taxes on time C) take out a small business loan D) invest in the stock market
D) invest in the stock market
Clyde is pursuing two clients for his consulting business. Time constraints prevent him from pursing both opportunities simultaneously. Clyde has a higher probability of landing Client A but the revenue generated would be smaller. The decision about which client to pursue is an example of which economic principle? A) rational self-interest B) trading C) scarcity D) opportunity cost
D) opportunity cost
If you are a customer looking for a way to secure a small loan, what is the business that would be the HIGHEST risk for the customer? A) commercial bank B) credit union C) savings and loan institution D) pawnshop
D) pawnshop
One opportunity cost families face is the time value of money. What does this refer to? A) the income one gets from a part-time job B) the time spent with loved ones C) the change in interest rates over a period of time D) the monetary increase found in earning interest
D) the monetary increase found in earning interest
What is one example of how a government exhibits limited influence in a market economy? A) the choice for workers to select where they want to work B) the ability of businesses to seek profits C) the creation of privately-owned businesses D) the setting of a minimum wage for workers
D) the setting of minimum wage for workers
Jeffery asks his employer to take out money out of every paycheck for future tax filings. Because Jeffery has a wife and two kids, he sets aside a different amount than his colleague Melinda who is single with no dependents. What process are Jeffery and Melinda both using when they ask their employer to take out this money? A) estimated payments B) filing taxes C) auditing D) withholding
D) withholding
