LEI Lesson 1 - Why Save?

Interest paid or earned on principal and on interest previously earned.

• simple interest

• compound interest

• fixed interest

• variable interest

Money received for work performed or from investments is the definition of:

• revenue

• income

• profit

• salary

Spending by households on goods and services is the definition of:

• investment

• savings

• consumption

• production

Compound interest benefits savers more than it benefits borrowers.

• True

• False

• It benefits both equally

• It benefits borrowers more

Investing with simple interest is better for savers than investing with compounding interest.

• True

• False

• It depends on the interest rate

• Simple interest is always better

Money a person has left to spend or save after taxes and other required deductions is called:

• disposable income

• net income

• gross income

• taxable income

Which of the following is the best definition of saving?

• Putting money under your mattress.

• Disposable income minus consumption spending.

• The discount received from buying something on sale.

• The interest paid on a savings account.

Interest paid on the initial investment only is known as:

• compound interest

• simple interest

• annual percentage rate

• interest on interest

The act of consuming less than disposable income and setting the remainder aside is called:

• spending

• saving

• investing

• borrowing

The original amount of money invested or lent is known as:

• principal

• interest

• equity

• dividend