Consumer Economics
Chapter Exam Questions
Course Introduction
Consumer Economics explores the decision-making processes of individuals and households as they allocate resources to satisfy their needs and wants. The course examines topics such as consumer behavior, budgeting, credit use, saving and investment strategies, insurance, and the impact of government policies on consumer welfare. Through theoretical frameworks and real-world applications, students gain an understanding of how economic forces, societal factors, and personal choices interact to shape financial outcomes and overall economic well-being.
Recommended Textbook
Personal Finance 12th Edition by Jack Kapoor
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Chapter 1: Personal Finance Basics and the Time Value of Money
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Q1) John is planning to go to graduate school in a program that will take three years.John wants to have $10,000 available each year for his school and living expenses.If he earns 6% on his investments,how much must be deposited at the start of his studies for him to withdraw $10,000 a year for three years?
A)$10,000
B)$18,390
C)$26,730
D)$29,100
E)$30,000
Answer: C
Q2) More recently,the annual price increase for most goods and services as measured by the consumer price index has been less than ____ percent.
A)1
B)2
C)3
D)4
E)5 Answer: B
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Chapter 2: Financial Aspects of Career Planning
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Q1) Which of the following is an opportunity to contact several firms in a short time span? (Hint: It is often held at local universities or convention centers.)
A)Networking
B)An internship
C)A career fair
D)A cover letter
E)An informational interview
Answer: C
Q2) A person who has worked in many fields and has a variety of skills in categories such as communications,research,and supervision would probably be best served with the use of a ____________ resume.
A)targeted
B)functional
C)chronological
D)goal-oriented
E)career change
Answer: B
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Chapter 3: Money Management Strategy: Financial
Statements and Budgeting
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Q1) Katherine Kocher has determined the following information about her own financial situation.Her checking account is worth $850 and her savings account is worth $1,200.She owns her own home that has a market value of $98,000.She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300.She has a car worth $12,500.She has recently purchased a mutual fund worth $5,500 and she has a retirement account worth $38,550.What is the value of her personal possessions?
A)$2,050
B)$98,000
C)$27,800
D)$44,050
E)$171,900
Answer: C
Q2) Which of the following would most likely be classified as a current liability?
A)Monthly balance due on a credit card
B)Total amount of a mortgage
C)Balance of a student loan
D)Total amount of a home improvement loan
E)None of these
Answer: A
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Chapter 4: Planning Your Tax Strategy
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Q1) Union dues,fees for tax return preparation,and other miscellaneous expenses are:
A)not deductible.
B)fully deductible.
C)deductible for self-employed individuals only.
D)deductible for people in certain income categories.
E)deductible to the extent they exceed two percent of adjusted gross income.
Q2) An itemized deduction of $500 with a 36 percent tax rate would reduce a person's taxes by:
A)$500.
B)$36.
C)$464.
D)$280.
E)$180.
Q3) Kelly Vernon wants her tax return prepared by a government approved tax expert.Which of the following tax preparers should Kelly use?
A)CPA
B)Enrolled agent
C)Nationally-certified tax preparer
D)Tax attorney
E)Local tax preparer
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Chapter 5: Financial Services: Savings Plans and Payment Accounts
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Q1) The Federal Deposit Insurance Corporation insures deposits up to $250,000 per person per financial institution.Suzanne has $200,000 in an individual account and $424,000 in a joint account with her husband,Ted.How much of Suzanne's money is notcovered by FDIC insurance?
A)$162,000
B)$174,000
C)$374,000
D)$50,000
E)$0
Q2) What are the main types of financial institutions used by consumers?
Q3) The profits from a mutual savings bank go to the: A)creditors.
B)loan applicants.
C)stockholders.
D)depositors.
E)community in which it operates.
Q4) A certificate of deposit is also known as a demand deposit.
A)True
B)False
Q5) Describe mobile transfer apps and how they work.
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Chapter 6: Introduction to Consumer Credit
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Q1) In determining your credit capacity,you first provide for basic necessities within your budget,such as:
A)furniture.
B)home furnishings.
C)mortgage or rent.
D)automobile.
E)durable goods.
Q2) Credit bureaus obtain data from which of the following?
A)Banks
B)Finance companies
C)Merchants
D)Credit card companies
E)All of these
Q3) The smaller the debt-to-equity ratio,the riskier the situation is for lenders and borrowers.
A)True
B)False
Q4) Interest is a periodic charge for the use of credit.
A)True
B)False
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Chapter 7: Choosing a Source of Credit: The Costs of Credit
Alternatives
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Q1) Both Chapter 7 and Chapter 13 bankruptcy are considered an easy way out of debt.
A)True
B)False
Q2) Which one of the following is not a danger signal of potential debt problems?
A)Paying the minimum balance due each month
B)Receiving second or third payment notices from creditors
C)Using savings to pay routine bills
D)Repaying loans faster than required
E)Depending on overtime and moonlighting to meet everyday expenses
Q3) In a Chapter 7 bankruptcy,which of the following debts may be excluded from discharge?
A)debts arising from fraud.
B)debts arising from embezzlement.
C)debts arising from driving while intoxicated.
D)debts arising from larceny.
E)All of these.
Q4) In a Chapter 13 bankruptcy,the debtor normally keeps all or most of his or her property.
A)True
B)False
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Chapter 8: Consumer Purchasing Strategies and Legal Protection
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Q1) The main purpose of the Edmund's Used Car Prices is to:
A)monitor safety problems of existing vehicles.
B)provide current used-car prices.
C)reduce sales of stolen vehicles.
D)list cars available for sale from government agencies.
E)provide VIN numbers for vehicles.
Q2) A cooperative is designed to:
A)solve consumer complaints.
B)test consumer products for quality.
C)sell products or services to members at reduced prices.
D)obtain brand-name items for less than wholesale cost.
E)lobby for changes in consumer protection laws.
Q3) Which of the following information is required on food labels?
A)Ingredients
B)Unit pricing
C)Generic name
D)Common product name
E)Brand name
Q4) What factors influence most people's buying decisions?
Q5) Distinguish between an implied warranty and an express warranty.
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Chapter 9: The Housing Decision: Factors and Finances
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Q1) The purpose of zoning laws is to:
A)restrict property use.
B)encourage new housing development.
C)minimize people moving from an area.
D)reduce real estate property taxes.
E)assist real estate agents in finding homes for sale.
Q2) John Ashford needs to sell his home because of a job transfer to another city.What actions should John take to prepare his home for selling?
Q3) Michelle Duncan wants to know what price home she can afford.Her annual gross income is $45,000.She owes $750 per month on other debts and expects her property taxes and homeowners insurance to cost $250 per month.She knows she can get a 7.5%,30 year mortgage so her mortgage payment factor is 6.99.She expects to make a 20% down payment.What is Michelle's affordable home purchase price? Round your answer to the nearest $100.
A)$76,000
B)$60,800
C)$304,000
D)$42,500
E)$254,800
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Chapter 10: Property and Motor Vehicle Insurance
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Questions
Q1) Which one of the following types of coverage would pay for damage to your automobile in an accident for which you were at fault?
A)Property damage liability
B)Collision
C)Comprehensive physical damage
D)No-fault insurance
E)Assigned risk pool coverage
Q2) The 25 in 50/100/25 refers to ____________ coverage.
A)collision
B)bodily injury liability
C)comprehensive physical damage
D)medical payments
E)property damage liability
Q3) Eating a balanced diet and exercising is an example of risk _____.
A)shifting
B)acceptance
C)reduction
D)assumption
E)avoidance
Q4) What are the factors that affect the cost of home insurance?
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Chapter 11: Health, Disability, and Long-Term Care Insurance
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Q1) The Affordable Health Act of 2010 requires new health plans to allow young people to remain on their parents' insurance policy until what age?
A)23
B)24
C)25
D)26
E)27
Q2) A hospital indemnity policy pays benefits directly to the hospital only when you are hospitalized.
A)True
B)False
Q3) Identify the sources of health care insurance.
Q4) Disability benefits begin on the first day you are disabled.
A)True
B)False
Q5) Medicare was never intended to pay all medical costs.
A)True
B)False
Q6) Describe the five basic types of health insurance?
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Chapter 12: Life Insurance
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Q1) The cost-of-living protection rider is designed to help prevent inflation from eroding the purchasing power of the protection your policy provides.
A)True
B)False
Q2) Which of the following attributes would not be used by an Underwriter to determine the appropriate premiums to charge for insurance?
A)Marital status
B)Gender
C)Health
D)Age
E)Occupation
Q3) After determining you need life insurance,you should then:
A)consult a local insurance company agent.
B)buy as much life insurance as you can afford.
C)estimate your life insurance requirements.
D)determine your life insurance objectives.
E)evaluate the ratings of the insurance company.
Q4) What are the six methods of estimating your life insurance needs? Explain the basic principle of each method.
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Chapter 13: Investing Fundamentals
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Q1) The amount of time that your investments have to work for you is an important factor when managing your investment portfolio.
A)True
B)False
Q2) To manage a financial crisis,many experts recommend that you take action to make sure your financial affairs are in order.Name and describe six steps you can take to safeguard against a crisis:
Q3) Matt Jackson is single and 24 years old.He has just graduated from college and obtained a job making $26,400 a year.Which one of the following investments would you recommend for his long-term investment program?
A)Corporate bonds
B)Government bonds
C)Growth stocks
D)Certificates of deposits
E)Savings account
Q4) The U.S.government is the world's largest provider of investment information.
A)True
B)False
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Chapter 14: Investing in Stock
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Q1) A limit order is a request to buy or sell stock at a specified price or better.
A)True
B)False
Q2) Mary Smith purchased 200 shares of Johnson electronics four years ago at $30.00 each.She paid a $30 commission on this transaction.She has decided to sell these shares at $50.00 each and will incur a $25 commission on this sale.What is the total investment amount?
A)$3,945
B)$6,000
C)$6,030
D)$9,975
E)$10,000
Q3) A long-term investment technique used by investors to purchase stock directly from a corporation without paying a commission to a broker is called:
A)dollar cost appreciation.
B)direct investment plan.
C)unregulated transaction.
D)regulated transaction.
E)over-the-counter transaction.
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Chapter 15: Investing in Bonds
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Q1) When investors purchase bonds that mature at regular intervals in order to balance risk and return,they are creating a:
A)bond ladder.
B)staggered investment program.
C)incremental investment program.
D)step-up allocation program.
E)guaranteed investment program.
Q2) Dave Harris purchased a single bond last year for $987.He knows he will receive $1,000 on March 1,2026.This date is referred to as the ____ date.
A)maturity
B)purchase
C)record
D)ex-dividend
E)declaration
Q3) The only way an investor can make money on a bond investment is to hold the bond until maturity.
A)True
B)False
Q4) How do interest rates in the economy affect the price of a corporate bond?
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Chapter 16: Investing in Mutual Funds
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Q1) Which one of the following statements is false?
A)Investors purchase mutual funds for diversification.
B)Investors purchase mutual funds because of their professional management.
C)Investors who purchase mutual funds are guaranteed a higher rate of return than if they were to purchase comparable stocks and bonds directly.
D)Professional mutual fund managers work for an investment company.
E)Even the best portfolio managers sometimes make mistakes.
Q2) The family of funds concept makes it convenient for shareholders to switch their investments among funds as different funds offer more potential.
A)True
B)False
Q3) Which type of mutual fund invests in high-yield,high-risk corporate bonds?
A)Junk-bond fund
B)Intermediate corporate bond fund
C)Municipal bond fund
D)Short-term government bond fund
E)World bond fund
Q4) Why do investors purchase mutual funds instead of purchasing stocks,bonds,or other investments on their own?
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Chapter 17: Investing in Real Estate and Other Investment
Alternatives
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Q1) You may invest in gold by purchasing the common stocks of gold mining companies.
A)True
B)False
Q2) Real Estate Investment Trusts must distribute at least 90 percent of their taxable annual earnings to shareholders.
A)True
B)False
Q3) Stuart Michelson has invested in several pieces of real estate.Which one of the properties that Stuart owns would be considered commercial real estate?
A)4 bedroom home that he does not rent out
B)20 acre tract of farm land that is sitting idle
C)Fourplex that he rents to college students
D)100 acres of land in the mountains that he hopes to subdivide and sell as residential lots
E)Vacation home.
Q4) Explain what factors drive up gold prices and what factors decrease gold prices.
Q5) It may take months to sell commercial property or limited partnership shares.
A)True
B)False
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Chapter 18: Starting Early: Retirement Planning
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Q1) The contribution Billy Freniere's employer makes to his retirement plan depends on the profits of the company.What type of retirement plan does Billy have?
A)Money-purchase pension plan
B)Stock bonus plan
C)Profit-sharing plan
D)Salary reduction plan
E)403(b) plan
Q2) Which of the following is a true statement about retirement planning?
A)You can expect to spend about 16 to 30 years in retirement.
B)It's never too early to begin planning for retirement.
C)You should not let your 45<sup>th</sup> birthday roll by without a comprehensive retirement plan.
D)Retirement planning has both emotional and financial components.
E)All of these statements are true.
Q3) Immediate annuities provide income payments at once and are usually purchased with a lump-sum payment.
A)True
B)False
Q4) What are the possible sources of income for retirees?
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Chapter 19: Estate Planning
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Q1) Estate planning is useful only to rich and elderly people.
A)True
B)False
Q2) Most people cannot afford the expense of using trusts.
A)True
B)False
Q3) If you marry after you have made a will,the will is revoked automatically unless certain conditions are met.
A)True
B)False
Q4) A simple will creates lower overall taxation for all individuals.
A)True
B)False
Q5) The adjusted gross estate is equal to the gross estate minus debts and costs.
A)True
B)False
Q6) Generally,the cost of writing a will is more than that for writing a living trust.
A)True
B)False
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