Unit 2 Review

What is the primary purpose of creating a budget?

• To track only discretionary spending

• To allocate resources effectively and plan expenses

• To avoid paying taxes

• To increase debt

Which of the following is considered a non-discretionary expense?

• Dining out

• Rent

• Clothing

• Vacation

What is the main advantage of using a Certificate of Deposit (CD)?

• High liquidity

• Higher interest rates compared to regular savings accounts

• Unlimited withdrawals

• No minimum deposit requirement

Which of the following is a benefit of having a good credit score?

• Higher interest rates on loans

• Easier approval for rental applications

• Decreased taxes

• More frequent credit card fees

What is the primary difference between a checking account and a savings account?

• Checking accounts earn higher interest

• Savings accounts are for daily transactions

• Checking accounts are typically used for daily transactions

• Savings accounts have no withdrawal limits

Which of the following is an example of a discretionary fund?

• Mortgage payment

• Grocery shopping

• Vacation savings

• Utility bills

What is the purpose of diversification in investing?

• To increase risk

• To concentrate investments in one area

• To spread risk across different assets

• To avoid paying taxes

Which of the following is a tax-advantaged retirement account?

• Checking account

• 401K

• Certificate of Deposit

• Savings account

What is the main purpose of a debit card?

• To borrow money from the bank

• To make purchases using funds directly from a bank account

• To earn rewards points

• To build credit

How can you maintain the value of your savings against inflation?

• Keep money in a checking account

• Invest in assets with returns that outpace inflation

• Store cash at home

• Spend all savings immediately