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Semester Exam- Financial Literacy

Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 1. 

Tangible items that can be touched, used, and purchased are _____.
A.
services
B.
goods
C.
wants
D.
needs
 

 2. 

Ethical behavior calls for honesty. Which of the following actions could be considered ethical?
A.
Borrowing a classmate’s homework to copy the answers.
B.
Studying for a test with a friend.
C.
Checking personal e-mail at work during your shift.
D.
Returning a homecoming dress to the store after wearing it to the dance.
 

 3. 

Which of the following is an example of a human resource?
A.
knowledge
B.
time
C.
money
D.
possessions
 

 4. 

When one goal must be achieved in order to achieve another goal, the two goals are _____.
A.
important
B.
conflicting
C.
unattainable
D.
interdependent
 

 5. 

What decision-making strategy weighs the costs against the benefits of an action, purchase, or financial decision?
A.
marginal analysis
B.
opportunity costs
C.
cost-benefit analysis
D.
common sense
 

 6. 

What is the first step of systematic decision-making?
A.
Explore the alternatives.
B.
Evaluate the decisions.
C.
Define the decision to be made.
D.
Act on the decision.
 

 7. 

The correct order for the three stages of management are _____.
A.
evaluation, planning, and action
B.
planning, action, and evaluation
C.
planning, evaluation, and action
D.
action, evaluation, and planning
 

 8. 

Forms of communication designed to reach a large number of people refers to _____.
A.
technology
B.
media
C.
social media
D.
globalization
 

 9. 

Social Security, Medicare, and Medicaid are examples of what?
A.
entitlements
B.
outsourcing
C.
globalization
D.
technological advances
 

 10. 

____ gives you access to a vast diversity of goods and services through worldwide markets.
A.
Social media
B.
Globalization
C.
Technology
D.
Offshore outsourcing
 

 11. 

Planning to buy a car in one year is an example of a _____ goal.
A.
short-term
B.
medium-term
C.
long-term
D.
realistic
 

 12. 

Monthly rent payments are an example of a(n) _____ expense.
A.
fixed
B.
variable
C.
discretionary
D.
emergency
 

 13. 

Which of the following is a benefit of making charitable contributions?
A.
Tax deductions on an individual’s income tax return.
B.
A feeling of fulfilling social responsibility.
C.
Being philanthropic is known to make individuals feel happier and relieve stress.
D.
All of the above.
 

 14. 

Data _____ is the process of studying data with the goal of discovering new information that can help with making decisions.
A.
processing
B.
inputting
C.
analysis
D.
synthesis
 

 15. 

When a budget period ends, fill in the _____ column and total each section.
A.
Estimated
B.
Actual
C.
Variance
D.
Planned
 

 16. 

In a cash flow statement, what are expenses called?
A.
Cash Inflow
B.
Actual Inflow
C.
Cash Outflow
D.
Actual Outflow
 

 17. 

Cash and savings that can be converted to cash quickly and easily are _____.
A.
current assets
B.
current liabilities
C.
fixed assets
D.
long-term liabilities
 

 18. 

Obligations to be paid over a long period of time are _____.
A.
current assets
B.
current liabilities
C.
fixed assets
D.
long-term liabilities
 

 19. 

In what stage of the family life cycle does marriage usually occur?
A.
beginning stage
B.
expanding stage
C.
developing stage
D.
launching stage
 

 20. 

In what stage of the family life cycle does retirement usually occur?
A.
expanding stage
B.
developing stage
C.
launching stage
D.
aging stage
 

 21. 

Which of the following is not a form of earned income?
A.
wages
B.
commissions
C.
rental income
D.
salaries
 

 22. 

Eligible workers who work more than _____ hours per week must receive overtime pay at least _____ times their regular hourly rate.
A.
30, 2
B.
35, 1.5
C.
40, 1.5
D.
40, 2
 

 23. 

Income paid as a percentage of sales made by salesperson is a _____.
A.
tip
B.
wage
C.
bonus
D.
commission
 

 24. 

Income earned by workers who are self-employed is called _____.
A.
profit
B.
capital gains
C.
entrepreneurial income
D.
gratuity
 

 25. 

The Employee’s Withholding Allowance Certificate is a federal tax form that is also called the _____.
A.
Form W-2
B.
Form W-4
C.
Form 1040
D.
Form I-9
 

 26. 

A(n) _____ is a report containing information used to calculate taxes owed by the taxpayer.
A.
tax return
B.
Form W-2
C.
audit
D.
Form W-4
 

 27. 

What is the amount on which taxes are calculated?
A.
net pay
B.
gross income
C.
taxable income
D.
earned income
 

 28. 

The _____ deduction is a fixed amount that may be deducted from adjusted gross income, which is set by law and will vary according to filing status.
A.
itemized
B.
taxable
C.
exempted
D.
standard
 

 29. 

The amount of total tax owed on income for the year is known as the _____.
A.
tax bill
B.
tax liability
C.
tax credit
D.
income liability
 

 30. 

Which tax form is the simplest form to use?
A.
Form 1040
B.
Form 1040A
C.
Form 1040EZ
D.
E-filing form
 

 31. 

What is it called when the federal government spends more money than it collects?
A.
deficit spending
B.
mandatory spending
C.
discretionary spending
D.
taxable spending
 

 32. 

What federal program pays for certain health-care expenses for older citizens and others with disabilities?
A.
Social Security
B.
Medicare
C.
Medicaid
D.
VITA Programs
 

 33. 

Which type of tax has the effect of imposing a higher tax rate on those with lower incomes?
A.
progressive
B.
regressive
C.
direct
D.
indirect
 

 34. 

Which of the following is not a benefit category provided by Social Security?
A.
disability benefits
B.
divorced people’s benefits
C.
survivor’s benefits
D.
low-income benefits
 

 35. 

At what age do workers become eligible for full retirement benefits from Social Security?
A.
55
B.
59 1/2
C.
65
D.
67
 

 36. 

Which type of bank is commonly known as a full-service bank?
A.
savings and loan association (S & L)
B.
Internet bank
C.
mutual savings bank
D.
commercial bank
 

 37. 

Which following statement is true of Internet banks?
A.
Most of their services must be paid for with service charges.
B.
Their low overhead costs allow them to pay higher interest rates on savings accounts.
C.
Most Internet banks also staff physical banks and branch offices.
D.
They have high operating expenses because they must maintain enough staff to be available 24 hours a day.
 

 38. 

A _____ is a special payment that functions as cash.
A.
cashier’s check
B.
certified check
C.
money order
D.
traveler’s check
 

 39. 

Customer deposits in a federally insured bank are insured up to what amount?
A.
$100,000
B.
$200,000
C.
$250,000
D.
$500,000
 

 40. 

Which of the following items does not appear on a regular check?
A.
balance of the account
B.
amount of check written in words
C.
name of the payee
D.
checking account number
 

 41. 

What banking service ensures a financial institution will honor a check even if it exceeds the account balance?
A.
stop-payment order
B.
overdraft protection
C.
money order
D.
check certification
 

 42. 

A(n) ______ checking account is a combination savings and checking account.
A.
basic
B.
interest-bearing
C.
lifeline
D.
personal
 

 43. 

Which of the following topics should be considered when shopping for a checking account?
A.
restrictions and penalties
B.
fees and charges
C.
interest rates
D.
All of the above.
 

 44. 

A(n) _____ check is written with a future date.
A.
postdated
B.
overdrafted
C.
bounced
D.
invalid
 

 45. 

You received your paycheck at the end of the day today, and you plan to go to the bank tomorrow. If you want to endorse the check immediately, which endorsement should you use?
A.
blank endorsement
B.
restrictive endorsement
C.
descriptive endorsement
D.
special endorsement
 

 46. 

Spreading risk by putting money in different types of investments is known as _____.
A.
dollar-cost averaging
B.
diversification
C.
risk tolerance
D.
variation
 

 47. 

An increase in the value of an investment is called _____.
A.
inflation
B.
net asset value (NAV)
C.
appreciation
D.
yield
 

 48. 

An overall rise in prices is called _____.
A.
a yield
B.
volatility
C.
a dividend
D.
inflation
 

 49. 

Which type of investment provides an individual with voting rights and receives dividends when declared by the company?
A.
common stock
B.
mutual fund
C.
preferred stock
D.
bond
 

 50. 

In which market does a company’s initial public offering (IPO) occur?
A.
primary
B.
secondary
C.
OTC
D.
investment club
 

 51. 

In which market do investors purchase securities from other investors rather than from the issuing company?
A.
primary
B.
secondary
C.
IPO
D.
new-issues
 

 52. 

What is a certificate of debt issued by a corporation or government?
A.
stock
B.
bond
C.
mutual fund
D.
dividend
 

 53. 

Which type of investment is created by pooling the money of many people and investing it in a collection of securities?
A.
common stock
B.
mutual fund
C.
corporate bond
D.
investment club
 

 54. 

Which of the following type of valuable goods can be considered an investment?
A.
gemstones
B.
previous metals
C.
collectibles
D.
All of the above.
 

 55. 

Investing a fixed dollar amount at regular intervals without regard to the price of the investment at the time you buy it is _____.
A.
dollar-cost averaging
B.
buy-and-hold investing
C.
a dividend reinvestment plan
D.
net asset value investing
 

 56. 

For most offers on property, there is usually some _____ between the buyer and seller.
A.
tension
B.
negotiation
C.
animosity
D.
manipulation
 

 57. 

Which of the following best describes an apartment that has a bathroom and one large room serving as a living room, bedroom, and kitchen?
A.
studio
B.
complex
C.
en suite
D.
subprime
 

 58. 

When is PMI required?
A.
When the loan has a monthly payment of more than 10 percent of the borrower’s monthly income.
B.
When the loan has a monthly payment of more than 25 percent of the borrower’s monthly income.
C.
When the borrower has a down payment of less than 50 percent of the purchase price.
D.
When the borrower has a down payment of less than 20 percent of the purchase price.
 

 59. 

Which of the following is a disadvantage of renting a residence?
A.
greater financial risk
B.
less mobility
C.
no tax benefits
D.
less free time
 

 60. 

Which of the following is an example of a common contingency clause in a purchase agreement?
A.
The validity of the agreement depends on the seller’s willingness to lower the asking price.
B.
The validity of the agreement depends on the buyer’s willingness to keep the property as-is.
C.
The validity of the agreement depends on the buyer’s ability to sell his or her own home.
D.
The validity of the agreement depends on the seller’s ability prove he or she is buying another home.
 

 61. 

What is the function of earnest money?
A.
Earnest money helps pay for insurance and taxes.
B.
Earnest money prohibits the seller from selling the home to someone else.
C.
Earnest money is part of the loan application package.
D.
Earnest money operates as a retainer for real estate attorneys.
 

 62. 

Which of the following is a receipt listing goods shipped by a moving company?
A.
invoice
B.
bill of lading
C.
packing slip
D.
lease
 

 63. 

What is true regarding month-to-month rentals?
A.
Renting month-to-month is typically more expensive.
B.
No notice needs to be given before leaving a month-to-month rental unit.
C.
Renting month-to-month does not require renters insurance.
D.
Roommates are not allowed under a month-to-month agreement.
 

 64. 

Which of the following actions helps a move go more smoothly when hiring a moving company?
A.
Getting rid of items you do not need or want before moving.
B.
Timing the move to not occur during the peak season for better service and rates.
C.
Checking whether you need additional insurance protection when moving your belongings.
D.
All of the above.
 

 65. 

What is true when hiring movers to move your belongings to another state?
A.
A federal tax is added to the cost.
B.
The movers must provide you with a copy of the pamphlet Your Rights and Responsibilities When You Move.
C.
You must use a government-approved moving company.
D.
The movers are not responsible for losses when moving items between states.
 

 66. 

Which of the following is true regarding the automobile marketplace?
A.
The automobile marketplace offers many different ways for consumers to shop.
B.
The automobile marketplace favors sellers and offers no recourse for buyers who have been cheated.
C.
The automobile marketplace is an example of a monopoly.
D.
The automobile marketplace offers very few options.
 

 67. 

Why should trade-in prices and vehicle prices be negotiated separately?
A.
Less tax is paid if they are done separately.
B.
It is illegal to negotiate them together.
C.
Consumers often get a better deal that way.
D.
They should not be negotiated separately as it makes up one purchase.
 

 68. 

The _____ contains a list of residual values of leased cars.
A.
American Automotive Almanac
B.
Automotive Value Guide
C.
American Automotive Leases Handbook
D.
Automotive Lease Guide
 

 69. 

The FTC Used-Car Rule does not apply to _____.
A.
new-car dealerships
B.
private sellers
C.
auto superstores
D.
used-car dealerships
 

 70. 

Which of the following is an expense that is not actually paid, but can represent a sizeable amount of money?
A.
fuel
B.
depreciation
C.
registration
D.
maintenance
 

 71. 

The FTC Used-Car Rules requires which of the following to be displayed on the Buyers Guide sticker?
A.
A description of warranty coverage or lack of it.
B.
A description of how many previous owners the car had.
C.
A description of where the car was manufactured.
D.
A description detailing for how much the car was previously sold and repurchased.
 

 72. 

When purchasing a used car, it is a good investment to purchase a(n) _____.
A.
air purifier
B.
upgraded battery
C.
VIN history report
D.
anti-corrosive sealant
 

 73. 

Which of the following is true regarding lemon laws?
A.
They do not apply to trucks, only cars.
B.
They do not apply to used vehicles.
C.
The help received under lemon laws is automatic and straightforward.
D.
The problem must be well documented, as well as the attempts to fix it.
 

 74. 

Which of the following is true regarding vehicle options?
A.
Additional safety options are free, but convenience options are not.
B.
The US Automotive Administration regulates what is considered “standard.”
C.
Standard options come at an increased cost.
D.
Different makes and models come with different sets of standard options.
 

 75. 

Which of the following costs is unique to leasing a car?
A.
interest paid
B.
finance charges
C.
gap insurance
D.
capitalized cost reduction
 

 76. 

When the prices and quantities supplied are plotted on a graph and connected, they form a line called the _____.
A.
demand curve
B.
supply curve
C.
resource curve
D.
consumer curve
 

 77. 

Which of the following scenarios best describes the problem of scarcity?
A.
Microsoft produces 10,000 copies of a Windows upgrade for 5,000 known systems.
B.
Target builds 3 new stores in a major metropolitan area to make shopping times faster.
C.
Apple produces 5,000,000 iPhones for 10,000,000 current iPhone users.
D.
Amazon builds 1,000 warehouse locations to reduce shipping costs.
 

 78. 

What is an opportunity cost?
A.
The value of an option that was given up.
B.
A fee attached to offers of employment and investing.
C.
The cost of doing business.
D.
Amount of money needed to open a business.
 

 79. 

Factors of production include land, labor, capital, and _____.
A.
supply
B.
demand
C.
opportunity
D.
entrepreneurship
 

 80. 

_____ is a common name for a market economy.
A.
Communism
B.
Capitalism
C.
Fascism
D.
Democracy
 

 81. 

What are the three market forces in a free-enterprise economy?
A.
competition, profit motive, supply and demand
B.
entrepreneurship, regulation, competition
C.
opportunity, supply and demand, marketplace
D.
land, labor, capital
 

 82. 

Supply and demand is closely connected to which of the following?
A.
labor
B.
capital
C.
competition
D.
price
 

 83. 

All businesses depend on _____.
A.
governmental regulation
B.
entrepreneurship
C.
profits
D.
scarcity
 

 84. 

Of the following, which is most likely to determine what and how much is produced in a marketplace?
A.
supply
B.
demand
C.
labor
D.
cost
 

 85. 

_____ encourages competence and efficiency in the production and sale of goods and services.
A.
Competition
B.
Scarcity
C.
Supply
D.
Profit
 

 86. 

_____ occurs when two or more businesses in an industry agree to sell at a set price and eliminate price competition.
A.
Nonprice competition
B.
Price fixing
C.
Unifying
D.
Price ceiling
 

 87. 

The _____ is the interest rate the Federal Reserve Banks charge commercial banks for credit when they borrow.
A.
discount rate
B.
federal rate
C.
unsubsidized rate
D.
frozen rate
 

 88. 

What is the national debt?
A.
The collective debt of a nation’s taxpayers.
B.
How much a country is owed by another country.
C.
How much is borrowed from the Federal Reserve by taxpayers at one time.
D.
The total amount of money the government owes at one time.
 

 89. 

When money is used for goods and services, it fulfills which economic function?
A.
unit of value
B.
economic indicator
C.
medium of exchange
D.
store of value
 

 90. 

Currency, legal tender, and banknotes are all used to describe which of the following?
A.
gross domestic product (GDP)
B.
money
C.
consumer price index (CPI)
D.
inflation
 

 91. 

Perfect competition, monopoly, monopolistic competition, and oligopoly are four basic _____.
A.
monetary policies
B.
subsidies
C.
flat tax distributions
D.
market structures
 

 92. 

Which of the following refers to the Fed’s buying or selling of treasury securities in the marketplace?
A.
open-market operations
B.
reserve requirements
C.
securing
D.
monetary policies
 

 93. 

What is the principal goal of subsidies?
A.
To increase deficit spending.
B.
To decrease national debt.
C.
To benefit the public in some way.
D.
To profit off of government-owned businesses.
 

 94. 

Which of the following statements about taxes is true?
A.
An indirect tax is paid to the government by the taxpayer.
B.
A regressive tax calls for people who make the most to be taxed the most.
C.
A direct tax is paid to the government by the taxpayer.
D.
A proportional tax calls for people who make the most to be taxed the most.
 

 95. 

How many districts make up the Federal Reserve System?
A.
5
B.
15
C.
6
D.
12
 

Short Answer
 

 96. 

List the five stages of the family life cycle.
 

 97. 

What are variations in the life cycle?
 

 98. 

Name a potential cause of personal financial crisis.
 

 99. 

Describe an advantage of renting over owning a home.
 

 100. 

What are the advantages of leasing a vehicle?
 



 
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