Consumer Economics
Exam Materials
Course Introduction
Consumer Economics explores the principles and practices that impact individual and household financial decisions in the marketplace. This course examines topics such as consumer rights and responsibilities, budgeting, credit and debt management, saving and investing, insurance, and the influence of advertising and public policy on consumer behavior. Through case studies and real-world applications, students gain practical skills to make informed financial choices, understand the broader economic environment, and critically analyze consumption trends affecting both personal well-being and society at large.
Recommended Textbook
Personal Finance 4 4th Edition by Lawrence J. Gitman
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15 Chapters
2587 Verified Questions
2587 Flashcards
Source URL: https://quizplus.com/study-set/3514
Page 2
Chapter 1: Understanding the Financial Planning Process
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) [Utility | Propensity to consume] refers to the satisfaction you receive from buying certain items.
Answer: A
Q2) As the rate of inflation increases,:
A) the cost of living goes down.
B) interest rates decrease.
C) pay checks decrease.
D) retirement plans have more difficulty meeting their goals.
E) purchasing power of a dollar increases.
Answer: D
Q3) "I want to accumulate a comfortable retirement fund" [would | would not] be a specific financial goal.
Answer: B
Q4) Money can be an emotional factor that may affect a person's financial plans.
A)True
B)False
Answer: True
Q5) The Consumer Price Index is a measure of [unemployment | inflation].
Answer: B
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Chapter 2: Using Financial Statements and Budgets
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) A budget is a detailed statement of what income and expenses occurred over a past period.
A)True
B)False
Answer: False
Q2) Mike and Teresa Garza have a monthly gross income of $5,000,but they pay $1,000 per month in taxes.They also pay $2,000 per month in various loan payments.What is their debt service ratio?
A) 20%
B) 30%
C) 40%
D) 50%
E) 60%
Answer: C
Q3) Using the future value calculations to estimate the funds needed to meet a goal takes compounding into account.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Preparing Your Taxes
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191 Verified Questions
191 Flashcards
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Sample Questions
Q1) If you have any earned income,you are required to file a tax return.
A)True
B)False
Answer: False
Q2) To qualify for the capital gain exclusion on a home sale,the seller must have resided in the residence for _____ of the previous 5 years.
A) 1
B) 2
C) 3
D) 4
E) 5
Answer: B
Q3) You have up to three years after filing your tax return to file an amended tax return (1040X).
A)True
B)False Answer: True
Q4) A tax credit is subtracted from your [taxable income | tax liability]. Answer: B
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Chapter 4: Managing Your Cash and Savings
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189 Verified Questions
189 Flashcards
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Sample Questions
Q1) Electronic funds transfer system (EFTS)allows you to make payments that occur on a regular basis.
A)True
B)False
Q2) Low interest rates have increased the supply of credit.
A)True
B)False
Q3) Certificates of deposit can be purchased only at banks,savings and loan associations,and credit unions.
A)True
B)False
Q4) There are numerous advantages and disadvantages of online bill payment systems.Which of the following is a potential advantage?
A) Privacy
B) FDIC insurance
C) Round-the-clock help
D) Efficient start-up
E) Use of float
Q5) Interest rates will be lower on your [savings | checking] accounts.
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Chapter 5: Making Automobile and Housing Decisions
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198 Verified Questions
198 Flashcards
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Sample Questions
Q1) Homeowner's insurance will cost about _____ percent of the market value of the home.
A) 1/5
B) 1/4 to 1/2
C) 1/2 to 4/5
D) 1/2 to 3/4
E) 3/4
Q2) [Lessor | Lessee] is another term for landlord.
Q3) In a condominium and townhome,the buyer receives title to an individual unit and joint ownership of the common areas.
A)True
B)False
Q4) Greg has negotiated a $20,000 price on a new pick-up truck.The manufacturer is offering a $1,500 rebate or 3.9 %,three-year financing.Greg is also able to get 7 %,three-year financing at his credit union.If Greg plans to finance $18,000 over three years,should he take the rebate or the 3.9 % financing?
Q5) The Real Estate Settlement Procedures Act governs [mortgage rates | mortgage closings].
Q6) A major variable cost of owning a car is [the loan payment | gasoline].
Page 7
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Chapter 6: Using Credit
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) _____ is a benefit of borrowing.
A) The ability to buy expensive goods while spreading the payments over time
B) Providing payments that fit into a budget
C) Meeting a financial emergency
D) Being able to purchase goods and services when checks are not acceptable
E) All of these are benefits
Q2) Credit bureau files often include information such as political and religious affiliations in addition to financial information.
A)True
B)False
Q3) Credit should not consistently be used for nondurable goods.
A)True
B)False
Q4) Rebate cards work best for those who use the rebates and:
A) charge large amounts on the card.
B) pay the total card balance off monthly.
C) carry high monthly balances.
D) travel internationally.
E) a and b
Q5) An improper use of extended credit would be to buy [a car | nondurable goods].
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Chapter 7: Using Consumer Loans
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) Calculate the finance charge and the monthly payment on a $20,000 add-on installment loan with an interest rate of 9% and a term of 5 years.
Q2) It is [legal | illegal] for a lender to charge a prepayment penalty.
Q3) About one in four student loans are past due.
A)True
B)False
Q4) Consolidation loans are used to purchase new furniture and appliances when many items are needed at the same time.
A)True
B)False
Q5) Sales finance companies:
A) lend money to retailers.
B) buy installment loans from retailers.
C) sell installment loans to retailers.
D) lend money to consumers.
E) sell installment loans to banks.
Q6) Jamie is going to buy some furniture with a single-payment loan that is discounted.The loan will be for $5,000 for 2 years at 10% interest.Calculate the APR on this loan.
Page 9
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Chapter 8: Insuring Your Life
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Unbundling in universal life insurance means that the cost of the insurance and savings elements are identified separately for the policy owner to see.
A)True
B)False
Q2) From the standpoint of the person buying insurance,the central purpose of insurance should be:
A) to collect for all accidental losses.
B) to transfer risks of serious losses.
C) to make profit out of uncertain future events.
D) to accumulate savings.
E) to reduce payments for the most frequently occurring losses.
Q3) Annual term insurance premiums increase as you get older while whole life insurance premiums remain constant.
A)True
B)False
Q4) If a loss is certain to occur,there is [a | no] risk.
Q5) The majority of term policies have a [level | decreasing] face value.
Q6) The life insurance policy that clearly separates the protection and savings elements is a [whole life | universal life].
Page 10
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Chapter 9: Insuring Your Health
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) Traditional indemnity policies reimburse the insured based on the [amount charged | usual,customary,and reasonable charges] for the medical services received.
Q2) Major medical insurance often supplements the basic coverage of hospital,surgical,and physician's expense insurance.
A)True
B)False
Q3) Disability occurs only when someone is completely incapable of returning to work.
A)True
B)False
Q4) A deductible clause in major medical insurance plans is most often on a per year basis.
A)True B)False
Q5) Medicare Advantage policies require payment from the policyholder in the form of a deductible.
A)True
B)False
Q6) Long-term care [does | does not] have a deductible.
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Chapter 10: Protecting Your Property
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189 Verified Questions
189 Flashcards
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Sample Questions
Q1) Some common liability risks include:
A) driving a car.
B) entertaining guests at home.
C) being careless in performing professional duties.
D) all of the above
E) none of the above
Q2) The advisable dollar limit for any one auto accident is:
A) $50,000
B) $100,000
C) $200,000
D) $300,000
E) $500,000
Q3) The principle of indemnity would prevent:
A) the act of one person from being imputed to another.
B) an insured from collecting more than he lost.
C) a negligent third party from being held liable for damages if the injured party was insured.
D) a significant amount of loss control activity.
E) an insurer from ever waiving it's right to subrogation.
Q4) A claims adjustor typically works for a(n) [insurance company | claimant].
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Chapter 11: Investment Planning
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168 Verified Questions
168 Flashcards
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Sample Questions
Q1) The _____ is not an organized security exchange.
A) New York Stock Exchange
B) American Stock Exchange
C) Midwest Stock Exchange
D) Pacific Stock Exchange
E) Over-the-Counter Exchange
Q2) The single most important reason for investing is for [home purchase down payment | retirement].
Q3) Stockbrokers are also known as:
A) market makers.
B) account executives.
C) broker-dealers.
D) commission sellers.
E) traders.
Q4) Portfolio management involves making decisions in order to:
A) buy low and sell high.
B) maximize risk and return.
C) accept risk.
D) own stocks in bear markets.
E) meet your investment needs and objectives.
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Chapter 12: Investing in Stocks and Bonds
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186 Verified Questions
186 Flashcards
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Sample Questions
Q1) A bond is issued at $1,000 par value during a time in which interest rates for similar bonds were 8%.Today new bonds issued with a similar credit worthiness have a 10% interest rate.Which of the following is most likely to be true about the bond?
A) It is currently selling for a premium.
B) It is currently selling at a discount.
C) It is currently selling at par.
D) The bond is likely to be called.
E) None of the above
Q2) Which of the following statements about preferred stock is true?
A) Preferred shareholders generally get enhanced voting rights.
B) Dividends must generally be paid to preferred shareholders before dividends may be paid to common shareholders.
C) Preferred stocks are a hybrid between equity and debt,because like common stock the owners of preferred shares can vote and like debt they are paid interest.
D) It would be foolish to purchase the common stock of a company that also issues preferred shares,because the preferred shares have a higher yield with a stronger guarantee.
E) None of the above are true
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Page 14
Chapter 13: Investing in Mutual Funds
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) Value funds are comprised of stocks with [low | high] PE ratios.
Q2) A no-load fund has no:
A) sales commission.
B) transaction fees.
C) management charges.
D) tax charges.
E) 12(b)-1 fees.
Q3) [Aggressive growth | Equity-income] funds would be more speculative.
Q4) Sector funds may include stocks from different indexes.
A)True
B)False
Q5) Investment company earnings result solely from dividends.
A)True
B)False
Q6) Index funds have provided competitive rates of return because:
A) their costs are lower than other stock funds.
B) it is difficult to outperform the market.
C) they have very low turnover rates.
D) they are tax efficient.
E) all of the above
Page 15
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Chapter 14: Planning for Retirement
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208 Verified Questions
208 Flashcards
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Sample Questions
Q1) When estimating retirement needs,you use the before-retirement investment return rate to adjust the current dollar shortfall to the actual shortfall at retirement.
A)True
B)False
Q2) The employer retirement plan that is intended to promote employee productivity and allows the employer to vary the amount of annual contributions is a:
A) qualified defined contribution plan.
B) thrift and savings plan.
C) profit-sharing plan.
D) 401(k)plan.
E) 403(b)plan.
Q3) Of the following survivors of a fully insured worker,_____ would not be eligible for Social Security benefits.
A) spouse age 50,with dependent children
B) spouse age 47,no children
C) spouse age 65,with dependent children
D) spouse age 65,no children
E) spouse age 26,with dependent children
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Chapter 15: Preserving Your Estate
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) Which of the following best describes a situation of intestacy?
A) Having insufficient medical insurance during a period of illness
B) Dying without heirs
C) Being physically challenged
D) Dying without a valid will
E) Dying without any probate property
Q2) Gift tax liability could be incurred on this transaction:
A) providing rent-free apartment for mother.
B) 1,000 hours of babysitting for grandchild.
C) son's deposit into husband-wife joint checking account.
D) setting up a revocable trust.
E) $35,000 given to son.
Q3) A(n) [simultaneous death clause| appointment clause] names the executors,guardians for minor children,and trustees and their successors.
Q4) The appointment clause in a will affirms the apportionment of taxes among various beneficiaries of the will.
A)True
B)False
Q5) [Most | Very few] people need to do estate planning.
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