Financial Literacy Exam

In order to get spending under control, a person should first

• seek help on investing from a financial planner.

• consult a credit counseling service.

• create a budget of current income and expenses.

• subscribe to financial newsletters and magazines.

Comparison shopping for a car is necessary because

• each dealer sells cars with different colors.

• lenders want to be sure consumers get the best price.

• the price for the car can vary a great deal.

• it is a requirement to qualify for car insurance.

Financial planners generally stress the importance of starting to save and invest early because

• a person can stop saving at age 40.

• of the power of compounding and appreciation.

• there are fewer bills to pay when a person is young.

• a person will not need insurance.

An important feature of a good financial goal is that the goal

• has a specific time frame.

• is appropriate for the person’s age.

• can last throughout the person’s life.

• will take at least ten years for the person to achieve.

Purchasing power decreases and it costs more money to buy goods when there is

• a bear market.

• inflation.

• deflation.

• a bull market.

What strategy can help a person achieve her goal to buy a house?

• Using credit cards to pay for expenses.

• Paying for large purchases in cash.

• Following a budget that allows for savings.

• Applying for more credit cards to increase her credit score.

A college student has to live on a tight budget. Before making a decision to buy the newest cell phone, which question should he ask himself first?

• Is the new cell phone cheaper than the one being used?

• Is the new cell phone on sale?

• Is the new cell phone a need or a want?

• Will my friends like the new cellphone?

Which of the following quotes is sound financial advice?

• “He who hesitates is lost.”

• “A penny saved is a penny earned.”

• “Don’t put off today what can be done tomorrow.”

• “The window of opportunity may only open once.”

Fixed expenses include

• food.

• vacations.

• entertainment.

• rent.

Mandatory deductions from a person’s paycheck include

• federal withholding tax and FICA.

• school taxes and contributions to a retirement account.

• regressive taxes and employee automatic savings.

• property taxes and employee benefits.