Economics 7.5.2 Playing the Game Yourself: Personal Finance

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1

Why do economic decisions vary from person to person even under the same circumstances?

A. The value of money is generic.

B. Costs and benefits are subjective.

C. Different people expect different returns.

D. Utility decreases differently for different people.

Answer: B

2

Because subjective decisions are based on a person's unique values and beliefs, economic decisions _________________.

A. vary from person to person

B. follow a personal production frontier

C. can be reduced to utility preferences

D. are always based on monetary considerations

Answer: A

3

Why do people come to different decisions using cost-benefit analysis even under the same conditions?

A. All values are ultimately monetary.

B. Costs and benefits are both subjective.

C. Investment payoffs vary as time goes forward.

D. Different people live under different governments.

Answer: B

4

Which of these most accurately describes the costs and benefits of using a credit card?

A. Credit cards are convenient but can result in debt

B. Credit cards charge low interest on high-cost items.

C. Credit cards cost money to use but result in lower prices.

D. Credit cards expand purchasing power but produce waste.

Answer: A

5

Which of these describes the costs and benefits of taking a college loan?

A. College loans help increase future earning power but result in a long-term commitment to monthly payments.

B. College loans require students to work while studying but they cost less than conventional loans.

C. College loans reduce tuition payments but increase total educational costs because of interest payments.

D. College loans help students with academic and athletic skill overcome financial hardships.

Answer: A

6

Which of these describes the costs and benefits of getting a mortgage?

A. Mortgages help people pay for college but involve lots of paperwork.

B. Mortgages enable people to buy houses but result in large interest payments.

C. Mortgages prevent government regulation of property but involve higher taxes.

D. Mortgages provide a replacement for lost or damaged possessions but come with high fees.

Answer: B

7

Which of these states one of the opportunity costs of attending college?

A. Specializing in one area of study limits a person's possible jobs.

B. The high cost of tuition requires most students to take college loans.

C. A college education is no guarantee of getting a high-paying job later in life.

D. Time spent on schoolwork takes away from the chance to earn money at a job.

Answer: D

8

What is one of the opportunity costs of attending college?

A. Specializing in one area of study limits a person's possible jobs.

B. It takes a lot of time to earn the money needed to pay for college.

C. The money spent on tuition could've been invested in stocks or bonds.

D. A college education is no guarantee of getting a high-paying job later in life.

Answer: C

9

Why does attending college involve an opportunity cost?

A. College tuition is very expensive.

B. College only opens up certain job opportunities.

C. It takes a lot of time to earn the money needed to pay for college.

D. The money spent on tuition cannot be invested in another way.

Answer: D

10

What do leases contain?

A. Utility bills

B. The obligations of renters and landlords

C. The interest payment on apartment-building mortgages

D. Insurance clauses providing for replacement cost in case of loss

Answer: B

11

What does a lease outline?

A. Obligations of renters and landlords

B. Price of all utilities for an apartment

C. Interest and principal payments of a loan

D. Types of accidents covered by an insurance policy

Answer: A

12

What kind of contract outlines the obligations of a landlord and his or her renters?

A. A bond

B. A lease

C. A mortgage

D. A regulation

Answer: B

13

Match each type of insurance with a situation in which that insurance would be useful.

A. Collision coverage

B. Renter's insurance

C. Disability insurance

D. Fee-for-service insurance

When your personal possessions are stolen from your apartment

When you lose your job because of an injury or illness

When your car is damaged in an accident you cause

When you want to choose your own doctor or hospital

B. When your personal possessions are stolen from your apartment

C. When you lose your job because of an injury or illness

A. When your car is damaged in an accident you cause

D. When you want to choose your own doctor or hospital

14

Match each type of insurance with a situation in which the insurance would be useful.

A. Uninsured motorists coverage

B. Homeowner's insurance

C. Disability insurance

D. Managed-care coverage

When you have to take a month off from work because of an injury or illness

When you need to visit a doctor about an illness

When your car is damaged by someone who has no auto insurance

When your house and possessions are destroyed by a fire

C. When you have to take a month off from work because of an injury or illness

D. When you need to visit a doctor about an illness

A. When your car is damaged by someone who has no auto insurance

B. When your house and possessions are destroyed by a fire

15

Match each type of insurance with a situation in which that insurance would be useful.

A. Life insurance

B. Renter's insurance

C. Disability insurance

D. Liability insurance

When you cause a car accident that injures other people

When you have to take a month off from work because of an injury or illness

When your personal possessions are stolen from your apartment

When you want to provide for your family after you die

D. When you cause a car accident that injures other people

C. When you have to take a month off from work because of an injury or illness

B. When your personal possessions are stolen from your apartment

A. When you want to provide for your family after you die

16

When is liability insurance needed?

A. When your personal possessions are stolen from your apartment

B. When someone with no insurance damages your car in an accident

C. When you have to take off time from work because of an injury or illness

D. When you cause an accident that damages another vehicle or hurts someone

Answer: D

17

What kind of customer would want collision coverage for his or her auto insurance?

A. Someone who has a record of causing accidents that result in high repair bills

B. Someone concerned about causing damage to his or her own car

C. Someone who has a car that costs too little to be worth repairing after an accident

D. Someone worried about getting into an accident with someone who has no insurance

Answer: B

18

Why do some auto insurance customers want medical coverage for their policies?

A. To prevent uninsured motorists from suing them for injuries they cause

B. To help find the best hospital to care for people they injured in a car accident

C. To avoid having to pay for hospital bills resulting from an accident they cause

D. To keep from having to make a co-pay in case of a minor injury after an accident

Answer: C

19

Which of these describes a situation in which people have to pay a deductible?

A. When their insurance policy only covers part of a medical expense

B. When their health insurance allows them to choose any doctor or hospital

C. When they have been in an accident caused by someone who has no insurance

D. When they have insurance that covers actual value instead of replacement cost

Answer: A

20

Which of these describes a situation in which people have to make a co-pay?

A. When they visit a doctor

B. When their house burns down

C. When their possessions are stolen

D. When they get their car repaired after an accident

Answer: A

21

Under what circumstances do people have to make a co-pay?

A. When their possessions are destroyed in a fire

B. When they go to a doctor because of an illness

C. When they cause a car accident that injures someone else

D. When they take a low-paying job while recovering from an injury

Answer: B

22

What is a bank customer's share of the profits made on loans?

A. Exchange rates

B. Stock dividends

C. Principal payments

D. Savings account interest

Answer: D

23

What do banks pay to their savings account customers?

A. Commission

B. Dividends

C. Interest

D. Profits

Answer: C

24

What do banks do with some of the profits they make by loaning out the money in their customers' savings accounts?

A. Pay interest on savings accounts

B. Pay a dividend to the Federal Reserve

C. Pay property taxes to the state government

D. Pay a tariff to the International Monetary Fund

Answer: A

25

What makes a checking account more convenient than a savings account?

A. You pay smaller fees on a checking account.

B. You earn more interest with a checking account.

C. You can use a credit card to access your money 24 hours a day.

D. You can spend your money without having to withdraw cash first

Answer: D

26

What makes a savings account a better investment than a checking account?

A. A savings account earns interest.

B. A savings account allows for a tax deduction.

C. A savings account is like part ownership in a bank.

D. A savings account can be accessed with a debit card.

Answer: A

27

Why does a savings account make a better investment than a checking account?

A. Savings accounts earn interest.

B. Checking accounts have an annual fee.

C. Savings accounts pay an annual dividend.

D. Checking accounts aren't insured by the government.

Answer: A

28

Match each fee or payment with the type of account or insurance it's associated with.

A. Minimum balance fee

B. Annual fee

C. Co-pay

Checking account

Health insurance

Credit card

A. Checking account

C. Health insurance

B. Credit card

29

Match each fee or payment with the type of account or insurance it's associated with.

A. Balance transfer fee

B. Non-sufficient funds fee

C. Deductible

D. Mortgage payment

Checking account

Health insurance

Credit card

Home loan

B. Checking account

C. Health insurance

A. Credit card

D. Home loan

30

Match each fee or payment with the type of account or insurance it's associated with.

A. Non-sufficient funds fee

B. Cash advance fee

C. Co-pay

D. Interest payment

Mortgage

Health insurance

Credit card

Checking account

D. Mortgage

C. Health insurance

B. Credit card

A. Checking account

31

What's the main reason to use a personal budget?

A. To appropriate discretionary funds

B. To maximize investment returns

C. To keep costs below benefits

D. To stay out of debt

Answer: D

32

Using a budget is a good way to what?

A. Earn dividends

B. Stay out of debt

C. Pay for utility bills

D. Avoid risky investments

Answer: B

33

Which of these helps you avoid debt by keeping your expenses below your income?

A. Liability insurance

B. A personal budget

C. Cost-benefit analysis

D. A production possibilities frontier

Answer: B

34

Put the steps in the correct order to show how a budget is made.

Write down expenses.

Reduce expenses if necessary.

Calculate income.

Compare expenses and income.

1. Calculate income.

2. Write down expenses.

3. Compare expenses and income.

4. Reduce expenses if necessary.

35

Put the steps in the correct order to show how to put together a personal budget.

Determine if your expenses are above or below your income.

Total your income.

Reduce expenses in flexible categories to save or increase savings.

Figure out how much money you are spending.

Categorize your expenses to show where your money goes.

1. Total your income.

2. Figure out how much money you are spending.

3. Categorize your expenses to show where your money goes.

4. Determine if your expenses are above or below your income.

5. Reduce expenses in flexible categories to save or increase savings.

36

Put the steps in the correct order to show how to put together a personal budget.

Figure out how much money you're spending.

Add up all of your sources of income.

Determine if your spending is below your income.

Reduce expenses in flexible categories to save or increase savings

Categorize your expenses to show where your spending goes.

1. Add up all of your sources of income.

2. Figure out how much money you're spending.

3. Categorize your expenses to show where your spending goes.

4. Determine if your spending is below your income.

5. Reduce expenses in flexible categories to save or increase savings.

37

Which of these is an example of discretionary spending?

A. Rent

B. Groceries

C. Debt repayment

D. Vacation

Answer: D

38

Which of these is an example of luxury spending?

A. Travel

B. Debt repayment

C. Housing

D. Clothing

Answer: A

39

Which of these is an example of a fixed expense?

A. Rent

B. Travel

C. Gasoline

D. Clothing

Answer: A

40

What are you paying for when you lease a car?

A. The rent on a parking space

B. The purchase price of the car

C. The production costs of the car

D. The decrease in the car's value

Answer: D

41

Which of these allows someone to buy a car that costs more than he or she can afford?

A. Lease

B. Car loan

C. Mortgage

D. Liability insurance

Answer: B

42

What provides collateral to secure a car loan?

A. The car

B. A car loan

C. A credit card

D. The driver's credit report

Answer: A

43

What does an amortization table show?

A. The deductible for different insurance policies

B. The principle and interest being paid on a loan

C. The ratio of dividends to profits paid on a share of stock

D. The co-pay required by different kinds of health insurance

Answer: B

44

Using an amortization table gives you information about what?

A. A loan

B. A credit card

C. An investment

D. An insurance policy

Answer: A

45

Which of these shows how a loan is paid by listing the principle and interest associated with each payment?

A. A credit report

B. An amortization table

C. A supply-and-demand curve

D. A cost-benefit analysis

Answer: B

46

What makes a credit card more convenient than a debit card?

A. It pays interest on major purchases.

B. It comes with collective bargaining power.

C. It gives 24-hour access to money in a savings account.

D. It can be used to buy things without immediate payment.

Answer: D

47

Which of these allows you to buy something without waiting until you have the money?

A. A check

B. A debit card

C. A credit card

D. An ATM card

Answer: C

48

Why does a credit card make it easy to go into debt?

A. You pay interest on unpaid credit card balances.

B. You can only get a credit card if you already owe money.

C. You have to pay a fee every time you use a credit card.

D. You can buy something before you have enough money to pay for it.

Answer: D

49

What does a good credit history do for consumers?

A. It keeps prices low.

B. It allows them get debit cards.

C. It makes it easier for them to get loans.

D. It helps them reduce their housing costs.

Answer: C

50

Maintaining a good credit history makes it easier to do what?

A. Get a loan

B. Save money

C. Increase revenues

D. Go to college

Answer: A

51

Which of these makes it easier for a person to get a credit card?

A. An angel investor

B. Liability insurance

C. A good credit history

D. A low-interest mortgage

Answer: C

52

What kind of a credit card can customers with a bad credit history get?

A. One with no annual fee

B. One that's secured by collateral

C. One that has a low cash advance fee

D. One with a low annual percentage rate

Answer: B

53

Which of these credit card features would be best for customers who want to pay off the balance on a high-interest credit card?

A. A long grace period

B. No fees for cash advances

C. Low fees for balance transfers

D. An annual fee that can be waived

Answer: C

54

Which of these fees is the biggest problem for customers who need to use their credit card to take money from an ATM?

A. Overlimit fee

B. Late payment fee

C. Cash advance fee

D. Balance transfer fee

Answer: C

55

What is the annual percentage rate (APR) on a credit card?

A. The credit card's maximum spending limit

B. The amount of interest charged on unpaid balances

C. The expected return on the credit card company's investments

D. The percentage of a person's income they can spend each year

Answer: B

56

What is the grace period on a credit card?

A. The amount of time a person has to wait to get approved for the card

B. The amount of years a person has to have worked before being able to get a card

C. The number of months the customer has to pay off a balance transferred from another card

D. The number of days the customer can wait to pay for purchases without being charged interest

Answer: D

57

What is a cash advance?

A. A loan to purchase a used car

B. The payment on a life insurance policy

C. A coupon payment on a government bond

D. The use of a credit card to take money from an ATM

Answer: D

58

Which of these protects customers who purchase defective products?

A. A boycott

B. Mediation

C. A warranty

D. Shopper's insurance

Answer: C

59

Which of these can be used to protect consumers from unsafe products?

A. Small-claims court

B. A recall

C. A warranty

D. A receipt

Answer: B

60

Which of the following doesnot protect consumers?

A. A recall

B. A boycott

C. A warranty

D. Antitrust laws

Answer: B

61

What's the difference between a brand-name and a generic product?

A. The quality of the product

B. The side effects of the product

C. The company that sells the product

D. The social responsibility of the maker

Answer: C

62

What is most similar to a brand-name product?

A. A generic product

B. An inferior good

C. A substitute brand

D. A normal good

Answer: A

63

What is most similar to a generic good?

A. A substitute

B. A brand-name good

C. A normal good

D. An inferior good

Answer: B

64

What is one of the primary concerns of socially responsible consumers?

A. Low price

B. Socialism

C. Sustainability

D. Customer service

Answer: C

65

Which of these would a socially responsible company use?

A. Product marketing

B. Tariff protections

C. Mediation services

D. Renewable resources

Answer: D

66

A socially responsible consumer might boycott a company that uses what?

A. Child labor

B. The assembly line

C. Tariffs

D. Sustainable production methods

Answer: A

67

Why might a letter-writing campaign get a company to change its business practices?

A. The company could end up spending a lot of money answering all of the letters.

B. The government wants to keep both consumers and companies from burdening the postal system.

C. Consumers use letter-writing campaigns to get the government to pass favorable legislation.

D. campaign will become a boycott if it doesn't respond.

Answer: D

68

Why might a company respond to a letter-writing campaign launched by a group of concerned consumers?

A. The letters demonstrate the moral wrongness of the company's actions.

B. The letters contain a veiled threat that economic pressure could follow.

C. The company could end up spending a lot of money answering all of the letters.

D. The company might want to prevent the consumer group from lobbying the government.

Answer: B

69

What is the purpose of a letter-writing campaign conducted by a group of consumers?

A. To get a company to change its business practices voluntarily

B. To force a company to comply with government regulations

C. To inspire politicians to pass consumer-protection regulations

D. To organize and publicize a boycott against a company

Answer: A

70

A boycott wouldnot be successful under what circumstance?

A. The company spent a lot of money lobbying the government.

B. The government decided to make the company's practices illegal.

C. Many of the company's executives quit because of economic pressure.

D. Most consumers didn't stay away from the company.

Answer: D

71

What does it take for a consumer boycott to be successful?

A. The boycott must significantly reduce the target company's profits.

B. The boycott must succeed in replacing traditional sales with online sales.

C. The boycott must be conducted by consumers, producers, and the government.

D. The boycott must bring the target company's offensive practices to the attention of the news media.

Answer: A

72

Participating in a boycott often involves a sacrifice because the boycotters end up doing what?

A. Going to jail

B. Paying higher prices

C. Having their wages reduced

D. Losing their re-election campaigns

Answer: B

73

How can consumers get the government to pass laws preventing companies from engaging in offensive behaviors?

A. By striking

B. By lobbying

C. By boycotting

D. By sanctioning

Answer: B

74

Which of these might result in the government passing a law preventing companies from engaging in unfair or offensive business practices?

A. Striking

B. Lobbying

C. Producing

D. Boycotting

Answer: B

75

Why do consumers have influence over politicians?

A. Consumers are able to boycott politicians' fund- raising events.

B. Politicians rely on the votes of consumers to keep them in office.

C. Corporations use profits from consumers to lobby the government.

D. Taxpayers can refuse to pay their taxes if they disagree with the government.

Answer: B