Consumer Economics
Final Test Solutions
Course Introduction
Consumer Economics explores the decision-making processes of individuals and households regarding the allocation of resources and consumption of goods and services. This course covers key topics such as consumer behavior, personal finance management, budgeting, credit and debt, savings and investments, and the impact of economic policies on consumer choices. Students will analyze market trends, understand the influence of advertising and culture on purchasing decisions, and evaluate strategies for maximizing utility within financial constraints. By the end of the course, learners will be equipped with practical tools for informed decision-making to improve their financial well-being in a dynamic economic environment.
Recommended Textbook
Personal Finance 11th Edition by Jack R. Kapoor
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19 Chapters
2490 Verified Questions
2490 Flashcards
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Chapter 1: Personal Finance Basics and the Time Value of Money
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) The main economic influence that determines prices is:
A) the stock market.
B) interest rates.
C) employment.
D) government spending.
E) supply and demand.
Answer: E
Q2) One aspect of financial planning is to make sure you maintain adequate insurance coverage for your needs. Which aspect of financial planning does this deal with?
A) Borrowing
B) Spending
C) Managing Risk
D) Investing
E) Retirement and Estate Planning
Answer: C
Q3) Developing financial goals is the first step in the financial planning process.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Financial Aspects of Career Planning
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) The education section of a resume should include:
A) names of instructors.
B) course numbers.
C) individual course grades.
D) schools attended.
E) class activities.
Answer: D
Q2) Continuing career education can be in a formal or an informal setting.
A)True
B)False
Answer: True
Q3) An interview designed to reduce the number of candidates for a position to a workable size is a(n) ____________ interview.
A) screening
B) informational
C) selection
D) contact
E) follow-up
Answer: A
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Page 4
Chapter 3: Money Management Strategy: Financial
Statements and Budgeting
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) Take-home pay is a person's earnings after deductions for taxes and other items.
A)True
B)False Answer: True
Q2) Sean Carter needs to store monthly statements from his bank, his credit card company and from his savings and loan. Where is the most appropriate place for Sean to store this information?
A) Home file cabinet
B) Safe deposit box
C) Personal computer
D) Best friend's house
E) None of these
Answer: A
Q3) A person's net worth is the difference between the value of the items owned and the amounts owed to others.
A)True
B)False Answer: True
Q4) Explain why opportunity cost is an important concept in money management. Answer: Answers will vary.
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Chapter 4: Planning Your Tax Strategy
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) An exclusion is earnings not included in taxable income.
A)True
B)False
Q2) Tax evasion is the use of illegal actions to reduce one's taxes.
A)True
B)False
Q3) A ______ allows a taxpayer to put pre-tax dollars into an employer-sponsored program to cover medical and child care costs.
A) tax credit
B) tax deduction
C) flexible spending account
D) tax deferred investment
E) tax exempt investment
Q4) A drawback of Flexible Spending Accounts (FSA) is that any account funds must be used to pay for expenses incurred before year's end or the money is lost.
A)True
B)False
Q5) How is taxable income computed?
Q6) What are the advantages of a 401K?
Page 6
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Chapter 5: Financial Services: Savings Plans and Payment Accounts
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) Which is a CD that offers a higher rate for every six months you are invested?
A) Bump-up
B) Indexed
C) Callable
D) Global
E) Promotional
Q2) The major service offered by investment companies is:
A) interest-bearing checking accounts.
B) variable-rate loans.
C) credit card accounts.
D) savings bonds.
E) mutual funds.
Q3) The purpose of a debit card is to:
A) obtain a discount on consumer purchases.
B) make credit card purchases.
C) quickly obtain a cash loan.
D) make investments with an investment company.
E) transfer money electronically.
Q4) Josh earned $120 on $1500 invested in a high yield money market account. He is taxed at 28% of his earnings. What is the effective yield on his investment?
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Chapter 6: Introduction to Consumer Credit
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181 Verified Questions
181 Flashcards
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Sample Questions
Q1) Which federal credit law protects you against an unauthorized use of your credit card?
A) Fair Credit Reporting Act
B) Fair Credit Billing Act
C) Equal Credit Opportunity Act
D) Fair Debt Collection Practices Act
E) Truth in Lending Act
Q2) The maximum amount of credit you are allowed by a creditor is called:
A) revolving credit.
B) line of credit.
C) convenience credit.
D) installment cash credit.
E) single lump-sum credit.
Q3) The baby boom generation currently represents about 30 percent of the population but holds nearly ____________ percent of the debt outstanding.
A) 80
B) 70
C) 60
D) 50
E) 40
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Chapter 7: Choosing a Source of Credit: The Costs of Credit
Alternatives
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) In a Chapter 7 bankruptcy, the debtor:
A) is required to draw up a petition listing all assets and liabilities.
B) does not have to pay a filing fee.
C) is called a "bankrupt."
D) is absolved of alimony and child support payments.
E) does not have to repay educational loans.
Q2) Most people who are in debt over their heads are:
A) criminals who take advantage of creditors.
B) living in poverty-stricken areas.
C) expected to declare Chapter 11 bankruptcy.
D) not college educated.
E) basically honest people.
Q3) "Keeping up with the Joneses" is one of the reasons for indebtedness.
A)True
B)False
Q4) Both Chapter 7 and Chapter 13 bankruptcy are considered an easy way out of debt.
A)True
B)False
Q5) Explain the concept of "float."
Page 9
Q6) What are two key concepts to keep in mind as you shop for credit?
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Page 10
Chapter 8: Consumer Purchasing Strategies and Legal Protection
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) Recently, Jim Dahl was on a bus tour in a mountainous area. The bus broke down forcing the group to stay overnight. Group members had to pay for their own hotel bills. Jim believes that the hotel cost for the group should be paid by the tour company. Which legal action would be most appropriate?
A) Small claims court
B) Mediation
C) Legal aid society
D) Arbitration
E) Class action suit
Q2) Advertising is a type of consumer information commonly provided by business organizations.
A)True
B)False
Q3) An implied warranty is usually in written form.
A)True
B)False
Q4) What are the main sources of consumer information?
Q5) What factors influence most people's buying decisions?
Q7) Explain the difference between arbitration and mediation. Page 11
Q6) 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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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) A cooperative housing arrangement involves:
A) government-supported rental units.
B) a nonprofit organization that rents units to its shareholders.
C) individual ownership of a living unit in a building.
D) factory built and on-site assembly.
E) housing units owned by a real estate developer.
Q2) Most people select a place of residence based on the following criteria:
A) lifestyle.
B) needs.
C) financial resources.
D) attitudes.
E) All of these.
Q3) Earnest money is used:
A) to pay real estate property taxes.
B) to reduce the mortgage interest rate.
C) as evidence of good faith by a homebuyer.
D) to pay the real estate agent's commission.
E) to pay a mortgage application fee.
Q4) Explain what amortization is and how a down payment and loan duration impact it.
Q5) What factors influence the type of housing a family will select?
Page 13
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Chapter 10: Property and Motor Vehicle Insurance
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) The uncertainties of direct and indirect losses to personal or real property due to fire, wind, accident, theft, etc., are called ____________ risks.
A) personal
B) business
C) property
D) liability
E) speculative
Q2) Which of the following is considered personal property for home insurance coverage?
A) Automobile
B) Garage
C) Furniture
D) House
E) Trees and shrubs
Q3) The 100 in 100/300/50 refers to:
A) property damage liability coverage.
B) the amount of the deductible.
C) collision coverage.
D) the total coverage for an accident.
E) the limit for bodily injury claims that can be paid to one person.
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Chapter 11: Health, Disability, and Long-Term Care Insurance
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) Medicare hospital insurance (Part A) is financed from a portion of the Social Security tax.
A)True
B)False
Q2) Which of the following should you ask about when considering a long-term care insurance policy?
A) Daily benefit
B) Benefit period
C) Policy limit
D) Elimination period
E) All of these
Q3) A hospital indemnity policy pays benefits only when you are hospitalized and only to the hospital where the care was provided.
A)True
B)False
Q4) Very few members of the Medicaid population are also covered by Medicare.
A)True
B)False
Q6) Identify the main private sources of health care insurance. Page 15
Q5) What are the primary sources of government health care insurance?
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Page 16
Chapter 12: Life Insurance
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167 Verified Questions
167 Flashcards
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Sample Questions
Q1) If you have convertible term insurance, you can exchange it for a whole life policy without a medical examination and at a higher premium.
A)True
B)False
Q2) Under the life income option, payments are made to the beneficiary for as long as he or she lives.
A)True
B)False
Q3) Fundamentally, group insurance is ____________ insurance.
A) term
B) whole life
C) ordinary life
D) permanent
E) universal life
Q4) Which statement is correct regarding stock life insurance companies?
A) A stock company sells participating policies.
B) A stock company always charges higher premiums than mutual companies.
C) A policyholder participates in the profit or loss of the company.
D) A stock company generally sells nonparticipating (non par) policies.
E) A stock company is owned by policyholders.
Page 17
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Chapter 13: Investing Fundamentals
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) Brenda Lee has received a $10,000 gift from her mother and is trying to decide how to invest it. She thinks she would like to invest it in stocks because she knows that stocks have been earning about a 10% rate of return over the last several years. What aspect of investing interests Brenda?
A) Risk
B) Return
C) Diversification
D) Liquidity
E) Income
Q2) The potential return of any investment should be directly related to the risk that the investor assumes.
A)True
B)False
Q3) Standard & Poor's and Value Line are companies that would be examples of:
A) stockbrokers.
B) securities exchanges.
C) stock regulations.
D) investors' services.
E) stock underwriters.
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Page 18
Chapter 14: Investing in Stocks
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) When a stock splits two-for-one, you should expect the price per share to:
A) decrease to half its pre-split price.
B) decrease in value by 75 percent or more.
C) remain unchanged.
D) increase to more than twice its pre-split price.
E) increase to twice its pre-split price.
Q2) Orlando Blodgett is buying stock in the Getaway Caribbean Cruise Company today. He had thought about buying the stock yesterday and if he had, he would have received this quarter's dividend. However, since he waited until today, he will not receive that dividend payment. Given this information, which one of the following dates applies to this stock today?
A) Record date
B) Ex-dividend date
C) Payment date
D) Stock split date
E) Stock repurchase date
Q3) When investors purchase stock on margin, they borrow stock from a stockbroker or brokerage firm.
A)True
B)False
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Chapter 15: Investing in Bonds
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) A type of bond that is unsecured and gives bondholders a claim secondary to that of other designated bondholders with respect to both income and assets is called a:
A) debenture bond.
B) mortgage bond.
C) subordinated debenture.
D) preemptive bond.
E) treasury bond.
Q2) The current yield for a bond is determined by dividing the annual income amount by the current market value.
A)True
B)False
Q3) Elizabeth Cherry has a bond that has 10 years to maturity, a face value of $1,000, an 8% interest rate, and a market price of $1,200. What is the yield-to-maturity on this bond?
A) 4.98 percent
B) 5.46 percent
C) 6.22 percent
D) 8.00 percent
E) 9.09 percent
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20
Chapter 16: Investing in Mutual Funds
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) Which type of mutual fund invests primarily in corporate bonds with maturities between 5 and 10 years?
A) Junk bond fund
B) Intermediate corporate bond fund
C) Municipal bond fund
D) Short-term government bond
E) World bond fund
Q2) The typical expense ratio for an index fund is:
A) 0.50 percent or less.
B) between 0.50 and 1 percent.
C) between 1 and 2 percent.
D) between 2 and 3 percent.
E) over 5 percent.
Q3) To purchase shares in an open-end fund, you may use four options: regular accounts, voluntary savings plans, contractual savings plans, and reinvestment plans.
A)True
B)False
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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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) One of the advantages of investing in limited partnerships, REITs, mortgages, or participation certificates is that you do not need to worry about:
A) federal income taxes.
B) state income taxes.
C) capital gains taxes.
D) declining property taxes.
E) maintenance chores.
Q2) The investment tax credit has been eliminated entirely for all types of real estate except:
A) low-income housing projects.
B) single-family dwellings.
C) shopping centers.
D) raw land.
E) developed land.
Q3) What role can a REIT play in diversifying an individual's investment portfolio?
Q4) Commercial property refers to land and buildings that produce lease or rental income.
A)True
B)False
Page 22
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Chapter 18: Starting Early: Retirement Planning
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175 Flashcards
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Sample Questions
Q1) If a rollover from a retirement fund or other IRA is not made directly to a similar employer-provided retirement plan or an IRA, there will be a mandatory federal income tax withholding equal to what percent of the taxable distribution?
A) 5
B) 10
C) 15
D) 20
E) 25
Q2) A defined-contribution plan has an individual account for each employee; therefore, these plans are also called individual account plans.
A)True
B)False
Q3) Under certain circumstances, the Roth IRA allows for penalty-free withdrawals as well as tax-free distributions.
A)True
B)False
Q4) How can retirees avoid housing traps?
Q5) What are the possible sources of income for retirees?
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Chapter 19: Estate Planning
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) Unmarried couples face formidable retirement and estate planning challenges.
A)True
B)False
Q2) Which of the following would keep you from being an executor of a will?
A) Being in the military
B) Being 16 years of age
C) Being unmarried
D) Being over 65 years of age
E) Being a family member of the deceased
Q3) Joint ownership is a good substitute for a will.
A)True
B)False
Q4) Estate planning is a subject most people would rather avoid: death-your own or that of your spouse.
A)True
B)False
Q5) Under the traditional marital share will, half of your estate is taxed at your death and half at your spouse's death.
A)True
B)False
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