Unit 2 Exam Fin Lit

Which of the following is TRUE about Payroll Taxes?

• Payroll taxes are paid on both earned and unearned income.
• Payroll taxes fund different operations and programs of the federal government.
• Payroll taxes fund the Social Security and Medicare programs.
• The amount of tax paid depends on many different factors but increases as income increases.

A key difference between commercial banks and credit unions is that:

• Commercial banks are 'for profit' and credit unions are 'not for profit'.
• Commercial banks typically pay higher interest rates than credit unions.
• Credit unions are more commonly located in rural areas while commercial banks are more commonly located in urban areas.
• Commercial banks offer more services, such as debit cars, and online banking, thank credit unions.

Which of the following would most likely be considered a contractual expense?

• Cell Phone
• Food
• Entertainment
• Clothing

Ariel is saving money to purchase a new computer before she leaves for college in two years. She wants to open a special account at a depository institution to keep her saved money safe. She has asked you for advice on which type of account would be best for her. What would be the best advice for Ariel?

• Check several depository institutions and choose one with a free, no-interest checking account. That way when Ariel has saved enough for her computer she can simply write a check and pay for it.
• Shop around for the depository institution with the highest interest rates for their savings accounts. She would be able to make regular savings deposits and earn interest while she is saving up for the computer.
• Look for a Credit Union that offers share draft accounts. These secure accounts are designed especially for saving for Long-term financial goals.
• Shop around for a depository institution that offers safe deposit boxes. These accounts offer extra security for deposits and can be set up to allow her to withdraw her money when she needs it.

Amanda and Marcus just finished their Income and Expense Statement for last month. They discovered that they have a net gain. What does this mean and what should they do?

• Amanda and Marcus are spending more money than they are earning. They need to find a way to balance their income and expenses by spending less on non-contractual expenses.
• Amanda and Marcus are earning more money than they are spending. They could place additional money in savings and/or spend it on other expenses.
• Amanda and Marcus are spending more money that they are earning. One of them should consider getting a second job for a time help boost their income.
• Amanda and Marcus are earning more money than they are spending. They should increase spending for non-contractual items to bring their income into balance with the expenses.

Samantha wants to be able to use funds in her checking account but finds going to the bank to withdraw cash to be inconvenient. She would like a more effective way to access her checking account funds. What would you suggest she do?

• Apply for mobile banking. That way she can access her money with her smartphone to pay for the things she needs. The amount she spends would automatically be deducted from her savings account.
• Apply for a debit card. That way she can use the card instead of cash to purchase the things she needs and the amount spent is immediately deducted from her account.
• Apply for a credit card. That way she can use the car to purchase the things she needs and pay for it when the credit card statement comes from her checking account.
• Request a cashier's check from her depository institution. That way she can spend money from her checking account without risk of an overdraft fee.

"Anyone can open an account here." Choose whether this statement best describes a credit union, commercial bank, both, or neither:

• credit union
• commercial bank
• both
• neither

"Owned by their customers." Choose whether this statement best describes a credit union, commercial bank, both, or neither:

• credit union
• commercial bank
• both
• neither

"In business to make money." Choose whether this statement best describes a credit union, commercial bank, both, or neither:

• credit union
• commercial bank
• both
• neither

All depository institutions offer ATM's in many different locations.

• True
• False