Consumer Economics
Practice Questions
Course Introduction
Consumer Economics explores the decision-making processes of individuals and households as they navigate the marketplace, focusing on how consumers allocate resources, respond to incentives, and manage risks in the face of scarcity. The course examines topics such as consumer behavior, budgeting and financial planning, credit and debt management, savings and investment strategies, consumer rights and protections, and the impact of external factors like advertising and public policy on consumer choices. Students will develop practical skills to make informed financial decisions and gain an understanding of the broader economic forces influencing consumer welfare.
Recommended Textbook
Personal Finance 6th Canadian Edition by Kapoor
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15 Chapters
1555 Verified Questions
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Page 2
Chapter 1: Personal Financial Planning: An Introduction
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Sample Questions
Q1) The amount of simple interest is determined by multiplying the amount in savings by the:
A) annual interest rate.
B) time period.
C) number of months in a year.
D) time period and number of months.
E) annual interest rate and the time period.
Answer: E
Q2) If a person deposited $100 a month for 5 years earning 9 percent, this would involve what type of computation?
A) simple interest
B) future value of a single amount
C) future value of a series of deposits
D) present value of a single amount
E) present value of a series of deposits
Answer: C
Q3) Risks associated with most financial decisions are fairly easy to measure.
A)True
B)False
Answer: False
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Chapter 2: Money Management Strategy: Financial Statements and Budgeting
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Sample Questions
Q1) Which of the following financial documents would most likely be stored in a home file?
A) Serial numbers of expensive items
B) Personal financial statements
C) Mortgage papers, title deed
D) Birth, marriage and death certificates
E) Guaranteed investment securities
Answer: B
Q2) Medical expenses, clothing, and telephone are examples of fixed expenses.
A)True
B)False Answer: False
Q3) Liabilities are cash and items of value that can be easily converted to cash.
A)True
B)False Answer: False
Q4) Most Canadians have an adequate savings for emergencies. A)True
B)False Answer: False
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Chapter 3: Planning Your Tax Strategy
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Sample Questions
Q1) An example of a non-refundable tax credit is
A) interest on a credit card or charge account.
B) certain job-related travel expenses.
C) the cost of commuting to work.
D) life insurance premiums.
E) student loan interest fees.
Answer: E
Q2) Taxable income is used to compute a person's
A) exemptions.
B) income tax.
C) deductions.
D) tax credit.
E) exclusions.
Answer: B
Q3) About one-third of each dollar you earn goes towards income taxes
A)True
B)False
Answer: False
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Chapter 4: The Banking Services of Financial Institutions
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Sample Questions
Q1) If you think interest rates will increase, you should consider investing your money in a longer-term GIC.
A)True
B)False
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) A trust has the purpose of
A) solving a person's financial problems.
B) obtaining low-interest loans.
C) handling daily money management activities.
D) managing the assets of a person.
E) improving a person's budgeting skills.
Q4) When preparing a bank reconciliation, interest earned on your chequing account is subtracted from the bank statement balance.
A)True
B)False
Page 6
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Chapter 5: Introduction to Consumer Credit
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Sample Questions
Q1) Kathy purchased a $2,000 digital TV from Young's Appliances. She will make 12 equal payments over the next year to pay for it. She is using:
A) an installment loan
B) open-end credit
C) revolving check credit
D) a line of credit
E) none of the above
Q2) The best way to maintain your credit rating is to
A) use credit sparingly.
B) pay cash for your purchases.
C) repay your debts on time.
D) declare a Chapter 7 bankruptcy.
E) use as many credit cards as you can.
Q3) A credit arrangement that has no extra costs and no specific repayment plan is called
A) installment sales credit.
B) incidental credit.
C) line of credit.
D) single lump-sum credit.
E) revolving check credit.
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Chapter 6: Choosing a Source Credit: the Costs of Credit Alternatives
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Sample Questions
Q1) Which of the following allows a debtor with a regular income to extinguish his or her debts from future earnings or other property over a period of time?
A) Assignment in bankruptcy
B) Frequent payment plan
C) Consumer proposal
D) A and B are correct
E) A, B and C are correct
Q2) If creditors add finance charges after subtracting payments made during the billing period, this is called the
A) adjusted balance method.
B) discount method.
C) previous balance method.
D) APR method
E) average daily balance method.
Q3) What are the various methods used to calculate the credit card balance on which interest is calculated?
Q4) What can you do if you are unable to meet your credit obligations?
Q5) What are the major sources of consumer credit?
Q6) What are two key concepts to keep in mind as you shop for credit?
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Chapter 7: The Finances of Housing
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Sample Questions
Q1) The amount of the down payment will affect the amount of mortgage a person can afford.
A)True
B)False
Q2) What factors influence the type of housing a family will select?
Q3) One significant drawback of home ownership is financial uncertainty.
A)True
B)False
Q4) Refinancing of a mortgage is recommended when
A) interest rates rise.
B) interest rates fall.
C) the escrow account balance declines.
D) two or more points are required by the lender at the time of closing.
E) refinancing costs are low
Q5) A split-rate mortgage helps to reduce interest rate risk.
A)True
B)False
Q6) An escrow account is designed to reduce the cost of a mortgage.
A)True
B)False
Page 9
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Chapter 8: Home and Automobile Insurance
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Sample Questions
Q1) Wind damage occurs to your car costing $3,000 to repair. If you have a $500 deductible for collision and full coverage for comprehensive, what portion of the claim will the insurance company pay?
A) $500
B) $1,300
C) $2,500
D) $3,000
E) $3,500
Q2) Which of the following is a system in which drivers involved in an accident collect medical expenses, lost wages, and related injury costs from their own insurance company?
A) assigned risk pool
B) no-fault insurance
C) comprehensive system
D) financial responsibility coverage
E) uninsured motorist's protection
Q3) What factors affect the cost of home insurance?
Q4) A rider is an addition of coverage to a standard insurance policy.
A)True
B)False
Page 10
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Chapter 9: Life, Health, and Disability Insurance
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Sample Questions
Q1) Very few employers provide disability income protection for their employees through the group insurance plans.
A)True
B)False
Q2) A particular insurance company will not be equally competitive for all policies. One company might have a competitively priced policy for 24-year-olds but not for 35-year-olds.
A)True
B)False
Q3) A nonparticipating policy has somewhat higher premiums than a participating policy.
A)True
B)False
Q4) What are the two types of life insurance? What are the major types and subtypes?
Q5) Canadians are amongst the least life-insured people in the world.
A)True
B)False
Q6) What are important provisions in most life insurance policies?
Q7) What is disability income insurance? What are the sources of disability income?
Q8) What are the steps in creating a plan to buy your life insurance?
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Chapter 10: Fundamentals of Investing
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Sample Questions
Q1) Bad products or poor financial management may result in investors experiencing ____________ risk.
A) business failure
B) interest rate
C) inflation.
D) market
E) income
Q2) Jamie Lynn earns $40,000 a year. Her monthly expenses total $1,700. What is the minimum amount of money that Ms. Lynn should set aside in an emergency fund?
A) $1,700
B) $3,400
C) $5,100
D) $8,400
E) $10,000
Q3) A speculative investment is an investment that is made in the hope of earning a relatively large profit over a long period of time.
A)True
B)False
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Chapter 11: Investing in Stocks
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Sample Questions
Q1) The type of stock that may earn more than the stated dividend if the firm has a good year is ____________ stock.
A) common
B) convertible preferred
C) participating preferred
D) cumulative preferred
E) callable preferred
Q2) By using the Canada.Com Finance Web site, an investor can find information on all of the following except
A) inside information.
B) the corporation's stock symbol.
C) current market values.
D) research information.
E) historical market quotes.
Q3) Enron's collapse has put thousands of innocent Americans out of work and wiped out the retirement portfolios of thousands more.
A)True
B)False
Q4) What is the primary difference between common stock and preferred stock?
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Chapter 12: Investing in Bonds
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Sample Questions
Q1) David Leclair purchased a federal government bond. The bond had a face value of $500. He purchased a:
A) treasury bill.
B) treasury note.
C) treasury bond.
D) Canada Savings Bond.
E) general obligation bond.
Q2) The current yield for a bond is determined by dividing dollar amount of annual interest by the current market value.
A)True
B)False
Q3) A registered bond is a bond whose ownership is registered in the owner's name by the issuing company.
A)True
B)False
Q4) What is the difference between a federal government marketable bond, treasury bill, and Canada Savings Bond?
Q5) Discuss why corporations issue bonds, and describe some of the types of bonds issued.
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Chapter 13: Investing in Mutual Funds
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Sample Questions
Q1) Even though they are under professional management, the individual investor to should evaluate a mutual fund investment.
A)True
B)False
Q2) A load fund is a mutual fund in which investors pay a commission every time they sell or redeem shares.
A)True
B)False
Q3) Income dividends and capital gain distributions are
A) exempt from taxation.
B) subject to federal taxation.
C) subject to federal taxation after the first $1,000.
D) subject to federal taxation after the first $2,000.
E) subject to federal taxation after the first $8,000.
Q4) Mutual funds that apportion their investments among common stocks and bonds are referred to as segregated funds.
A)True
B)False
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Chapter 14: Retirement Planning
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Sample Questions
Q1) Only saving now and curtailing current spending can ensure comfortable retirement later.
A)True
B)False
Q2) The contribution you are required to make to the CPP is fixed.
A)True
B)False
Q3) You can expect to spend about ________ years in retirement
A) 5-10
B) 11-15
C) 16-20
D) 21-25
E) 26 or more
Q4) Which type of housing is designed to allow people to stay in their homes as they grow older?
A) Accessory apartment
B) ECHO unit
C) Rooming house
D) universal design
E) professional companionship arrangement
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Chapter 15: Estate Planning
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Sample Questions
Q1) Many people don't give a single thought to preparing for death.
A)True
B)False
Q2) A person or institution that holds or generally manages property for the benefit of someone else under a trust agreement is called a(n)
A) beneficiary.
B) executor.
C) trustee.
D) guardian.
E) executrix.
Q3) A will is a way to transfer your property according to your wishes after you die.
A)True
B)False
Q4) An ethical will is
A) not a legally binding document, however it can help with estate planning.
B) also called a holographic will.
C) part of a formal will.
D) also called an intestate will.
E) a legally binding document.
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