Consumer Economics
Final Test Solutions
Course Introduction
Consumer Economics explores the economic principles and decision-making processes that influence how individuals and households allocate their resources. The course examines topics such as consumer behavior, budgeting, credit and debt management, saving, investing, and the impact of government policies on consumer choices. Students will analyze real-world cases to understand the motivations behind spending and saving, evaluate consumer rights and responsibilities, and assess strategies for achieving financial well-being in an ever-changing economic environment.
Recommended Textbook
Personal Finance 2nd Edition by Robert B. Walker
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17 Chapters
1143 Verified Questions
1143 Flashcards
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Chapter 1: Money Matters: Values, vision, mission, and You
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Sample Questions
Q1) If Joe has monthly expenses of $600 rent,$100 insurance,$300 food and entertainment,and $100 miscellaneous repairs,what will his income need to be (per month)for him to become financially independent?
A)$1,500
B)$2,000
C)$1,350
D)$1,100
Answer: D
Q2) SMART goals need to be
A)sporadic.
B)measurable.
C)artful.
D)reliable.
E)tough.
Answer: B
Q3) The most important factor in choosing a career is receiving the highest salary. A)True
B)False
Answer: False
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Page 3
Chapter 2: Planning and Budgeting
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Sample Questions
Q1) What is the second logical step in gaining perspective into your financial situation?
A)Understand the elements of personal financial statements
B)Keep a spending journal
C)Create a personal cash flow statement
D)All choices are incorrect.
Answer: A
Q2) Which of the following are reasons for keeping a spending journal?
A)To become more aware of what you are buying and how much it costs
B)To help you think about the value of what you are buying before you spend
C)To track where your money goes so you can stop the "little leaks" by making changes in your spending habits
D)All of the options are correct.
Answer: D
Q3) Budget variances are where your income and spending differ from your budget.
A)True
B)False
Answer: True
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Chapter 3: Financial Instruments and Institutions
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Sample Questions
Q1) Which is not a benefit of overdraft protection?
A)Saves you money in overdraft fees
B)Saves your reputation
C)Saves you time
D)Allows you to not have to balance your checking account
Answer: D
Q2) In banking terminology,CD stands for
A)compact disk.
B)cash on deliver.
C)cash deposit.
D)certificate of deposit.
Answer: D
Q3) What is the advantage of a credit union which allows them to pay you a higher return on deposits ?
A)Being a not-for-profit business
B)Having many locations
C)Having many ATMs
D)Having high-end technology
Answer: A
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Page 5
Chapter 4: Time Value of Money
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55 Flashcards
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Sample Questions
Q1) What gives money its value?
A)Supply and demand
B)Backed by gold
C)Backed by silver
D)Present values
Q2) Using mathematical formulas,financial tables,or a financial calculator,you can find the
A)future value of an amount invested today.
B)present value of an amount you will receive in the future.
C)future value of an amount you deposit annually.
D)present value of an amount if you make annual payments.
E)all of the options are correct.
Q3) Therese made an investment of $1,000 into an account that pays a 10% annual interest rate which is compounded quarterly.At the end of the 12-month period,Therese earned $103.81 in interest on her $1,000 investment.She calculates her annual percentage yield (APY)to be 10.38%.This is an example of how interest is
A)compounded.
B)the same as the annual percentage rate (APR).
C)effected by the annual percentage yield (APY).
D)part of the truth in savings act.
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Chapter 5: Consumer Credit: Credit Cards and Student Loans
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79 Flashcards
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Sample Questions
Q1) Which of the following is not a reason that people apply for credit and end up getting into debt?
A)Overdraft protection
B)Getting enticed by low introductory rates
C)Not paying any more than the minimum payment
D)Strong temptation of instant gratification
Q2) There are no advantages to the use of credit cards and they should be avoided at all cost.
A)True
B)False
Q3) The application used to determine financial need is called what?
A)FAFSA
B)SAFSA
C)AFFSA
D)FAASF
Q4) Private student loans generally
A)have higher fees and interest rates.
B)have lower interest rates but higher fees.
C)have higher interest rates but lower fees.
D)have lower fees and interest rates.
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Chapter 6: Credit Bureau Reports and Identity Theft
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Sample Questions
Q1) In paying for parking or traffic tickets,how should you pay for the items?
A)Cash
B)Check
C)Debit card
D)Credit card
Q2) Connie got a phone call saying she was randomly chosen to receive $1,000.The caller wanted to verify who she was and asked for her Social Security number.She immediately hung up because she knew she would be a victim of what?
A)Phishing
B)Skimming
C)FICO
D)None of the options are correct.
Q3) What of the following information about freezing your credit report is false?
A)You have to contact all three credit bureau agencies.
B)It prevents credit,loan,and services agencies from accessing your credit report without your approval.
C)It is optional.
D)It is completely free.
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8
Chapter 7: Auto and Home Loans
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Sample Questions
Q1) Second mortgages can be extremely risky.
A)True
B)False
Q2) A home equity loan for the purpose of debt consolidation is
A)never a good idea.
B)once in a while a good idea.
C)not always a good idea.
D)hands down,the best way to go.
Q3) Which of the following are not types home equity loans?
A)Home equity line of credit (HELOC).
B)Fixed-rate/fixed-term.
C)Balloon payment loans.
D)All of the choices are types of home equity loans.
Q4) Calculate the affordable monthly car payment for a person who has a gross monthly income of $3,250.00 and has $200 of monthly student loan payments,rent of $500,and $150 of child support?
A)$470.00
B)$420.00
C)$320.00
D)$270.00
Page 9
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Chapter 8: Debt,foreclosure,and Bankruptcy
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70 Flashcards
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Sample Questions
Q1) The best way to deal with not being able to pay your mortgage is
A)don't open the mail from the bank.
B)call your lender and work something out.
C)don't answer the phone.
D)move in the middle of the night.
Q2) Which of the following is the first step in the foreclosure process?
A)The bank files a paper with the courts declaring the intent to foreclose.
B)Required legal notices are published in the local paper.
C)The property is sold to the highest bidder at the sheriff's auction.
D)The new owner evicts the existing owner from the property.
Q3) What is the 10-second rule?
A)If you drop an item in a store,it's still safe to pick it up after 10 seconds
B)Hold an item for 10 seconds before you put it in your cart,asking yourself if you really need the item and,can afford to pay for it
C)Put an item in your cart and,if you don't want it after 10 seconds take it out
D)All of the choices are correct.
Q4) Bankruptcy will discharge a student loan.
A)True
B)False
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Chapter 9: Tax Management
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Sample Questions
Q1) There are ________ filing statuses.
A)7
B)6
C)5
D)4
Q2) What is the time limit on short-term gain?
A)24 months
B)18 months
C)12 months
D)6 months
Q3) Boris wanted to reduce his tax liability by lowering the amount of income that is taxable through deductions and credits.To do this,he decided to use the cafeteria plan available through his employer.How is the cafeteria plan advantageous for Boris?
A)The cafeteria plan allows Boris to select from a pool of benefit choices,some or all of which may be tax-advantaged.
B)These qualified benefits will be paid by Boris on a pretax basis,which reduces his taxable salary.
C)It allows him to claim a higher number of exemptions on his taxes.
D)A and B
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Page 11
Chapter 10: Insurance: Covering Your Assets
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Sample Questions
Q1) If you should become disabled,what are some options you can take to remain secure during the waiting period before being able to file a claim on your disability insurance?
A)Accrue sick leave to cover missing income
B)Accrue vacation to cover missing income
C)Save enough income in an emergency fund to cover missing income
D)All options are correct.
Q2) What is the difference between replacement value and actual value for personal property insurance?
A)Actual value is the cost to replace an item.
B)Replacement value is the amount you could get for selling the item at a garage sale.
C)Replacement value is typically the current retail cost to replace the item.
D)Actual value is typically greater than replacement value.
Q3) The insurance declaration page focuses on what items are excluded from coverage.
A)True
B)False
Q4) Insurance cannot be purchased online.
A)True
B)False
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Chapter 11: Investment Basics
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Sample Questions
Q1) Ten years ago,your grandparents gifted you a 20-year,$1,000 bond.The interest rate at the time of purchase was 5%.Today,comparable bonds are paying 7%.Approximately how much could you sell this bond for?
A)$860
B)$800
C)$918
D)$1,200
Q2) What percentage of your investments should be part of Tier III,the 'high-risk,high-return' zone?
A)5%
B)10%
C)20%
D)Whatever percent of money you can lose without fear of bankruptcy
Q3) A household with an annual take-home pay of $120,000 a year needs how much in its emergency fund?
A)$1,200 to $7,200
B)$6,000 to $20,000
C)$30,000 to $72,000
D)$12,000
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Chapter 12: Mutual Funds
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57 Flashcards
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Sample Questions
Q1) ________ refers to the operating expenses of the fund divided by the total assets of the fund,expressed as a percentage.
A)An expense ratio
B)A front-end load
C)An end load
D)An E/M ratio
Q2) When are exchange traded fund purchases and sale orders executed?
A)At the beginning of each business day
B)At the end of the business day
C)After a two-hour waiting period
D)In "real-time" during market hours
Q3) ________ are funds that invest in international and domestic companies.
A)Global funds
B)International funds
C)Exclusive funds
D)Balanced mutual funds
Q4) All mutual funds have an expense ratio; however,there are no-load funds as well as funds with loads.
A)True
B)False
Page 14
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Chapter 13: Stocks
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Sample Questions
Q1) Which of the following describes a bear market?
A)The market prices are increasing.
B)The market is going up and down with no determined trend.
C)Stock market indexes have decreased 20% or more over at least a two-month period.
D)Your stock portfolio is losing money.
Q2) Common stock ________.
A)has guaranteed returns
B)is the first to be paid in the event of bankruptcy
C)has preferential treatment as far as liquidation
D)represents ownership in a company
Q3) Which item is typically not a consideration when researching a company in order to buy stock?
A)P/E ratio
B)Television and radio marketing
C)Future outlook for the company and the industry
D)Dividend yield
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15
Chapter 14: Bonds
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Sample Questions
Q1) What is the yield to maturity (YTM)on a bond that sells for $950,has a coupon rate of 4%,matures in six years,and has a par value of $1,000?
A)6%
B)4.99%
C)4.26%
D)3.71%
Q2) As a bondholder,you ________.
A)are lending money to a corporation or government entity
B)are a part owner of the corporation
C)have no risk in losing your money
D)can only receive your principal investment when the bond matures
Q3) High-yield bonds (also known as ________ bonds)are corporate bonds that are issued by organizations that do not qualify for "investment-grade" ratings.
A)convertible
B)jewel
C)junk
D)lottery
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Chapter 15: Real Estate Investments
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Sample Questions
Q1) What options do you have in real estate investment if you do not have the time or skill to be a landlord?
A)Stay out of the business
B)Flip real estate
C)Quit your job so you have the time; the tax advantage will be worth it
D)Invest in a real estate investment trust (REIT)
Q2) Equity REITs invest in ________.
A)Loans to finance property development
B)Property
C)Real estate stocks
D)Municipal bonds
Q3) A(n)________ collects funds from a group of individuals and invests it in real estate.
A)"flipping" crew
B)REIT
C)ROI
D)None of options are correct.
Q4) Passive income is not one of the advantages of owning rental property.
A)True
B)False
Page 17
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Chapter 16: Retirement and Estate Planning
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Sample Questions
Q1) What documents should not be kept in your safety deposit box?
A)Life insurance policies and your will
B)Military services records
C)Divorce papers
D)Birth certificate
Q2) Which is not a reason to start saving for retirement?
A)Family
B)Sabbatical
C)Change of heart
D)None of the options are correct.
Q3) Contributions into a Roth IRA are ________.
A)tax-deductible
B)not tax-deductible
C)two for one
D)government matched
Q4) Charitable remainder trusts have tax advantages but provide no estate planning benefits.
A)True
B)False
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Chapter 17: Financial Planning for Life
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Sample Questions
Q1) It is important to prioritize,minimize,organize,and economize things that exhaust you in your life.
A)True
B)False
Q2) Rahul is NOT being frugal if he
A)wraps his girlfriend's present in newspaper because he doesn't want to pay for wrapping paper.
B)means to use coupons when he goes for ice cream but leaves them at home.
C)doesn't use the heat during the winter to save on the electric bill.
D)"maps out" where he is shopping prior to leaving his dorm and downloads e-coupons for each location.
Q3) To simplify material things that are physically and mentally exhausting,you should
A)prioritize,minimize,and socialize.
B)balance,prioritize,and minimize.
C)organize,energize,and economize.
D)prioritize,spiritualize,and minimize.
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