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Financial Literacy — Test Answers

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1
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What should consumers consider when it comes to the price of this product?

A
It includes shipping and handling costs.
B
It takes into account maintenance costs.
C
It explains why this price is a good deal.
D
It makes the full cost appears lower than it is.
3

The Hendersons are hosting a barbecue for five people and want to purchase enough chicken for everyone to have two pieces. Which option makes the most financial sense?

A
a 20-pack bag of chicken at $35
B
10 individual chicken breasts at $3 each
C
a 12-pack bag of chicken at $20
D
5 two-packs of chicken breasts at $5 each
4

A federal payroll tax that supports retired workers is

A
corporate tax.
B
progressive tax.
C
social security tax.
D
sales tax.
5

What effect would a tax increase have on income?

A
It would increase net income.
B
It would not affect gross income.
C
It would not affect net income.
D
It would reduce gross income.
6

In addition to federal income tax, many people also pay

A
state income tax.
B
corporate tax.
C
local medicare tax.
D
local social security tax.
7

To change gross income, someone would need to

A
increase withholdings.
B
earn more money.
C
save more per month.
D
reduce deductions.
8

Putting money into more than one kind of investment at a time is called

A
liquidity.
B
sunken cost.
C
diversification.
D
compound interest.
9

Which statement best describes what happens when people declare bankruptcy?

A
Some of their debts can be eliminated, and loan terms are renegotiated with lenders.
B
Some of their debts can be eliminated, but they must agree not to take on more debt.
C
All of their debts are eliminated, but they have to sell their assets, such as their homes.
D
All of their debts are eliminated, and they are given a fresh start.
11

Julie wants to buy a car and is deciding how she should invest her money. To best meet her needs, she should

A
invest in US savings bonds because of its short term.
B
keep her money in a savings account for easy access.
C
invest in a commodity because of its low risk.
D
keep her money in a checking account for easy access.
13

Under which circumstance would someone need disability insurance?

A
A person has contracted the flu and needs a prescription.
B
A person's suitcase was stolen and valuables were lost.
C
A person's house was seriously damaged during a natural disaster.
D
A person was in a car accident and cannot work for several months.
14

Compared to a short-term investment, what is the general return of a long-term investment?

A
A long-term investment has a lower return because it has lower risk.
B
A long-term investment has a similar return to a short-term investment.
C
A long-term investment has a greater return because it has lower risk.
D
A long-term investment has a greater return because it has greater risk.
15

Interest paid on a loan is calculated as a percentage of the

A
compounded principal.
B
principal.
C
collateral.
D
amount owed.
16

Which of these are ways that identity theft can happen? Choose four correct answers.

A
by fraud
B
by forgery
C
by financial engineering
D
by phishing
E
by social engineering
17

Which statement about tuition is the most accurate?

A
Tuition is higher for public colleges than private ones.
B
Community colleges tend to be more expensive.
C
Four-year universities have the lowest tuition.
D
Public colleges are cheaper for in-state residents.
18

Which is an example of a short-term investment?

A
bonds
B
savings accounts
C
retirement funds
D
houses
19

Insurance is a financial service that allows a

A
consumer to share liability with a company.
B
company to maximize risk for a consumer.
C
consumer to transfer all risk to a company.
D
company to control finances for a consumer.
20

Which statement best describes a college education?

A
It usually takes two years to complete and tends to focus on technical training.
B
It lasts a short period of time—only a few months, or even weeks.
C
The student pays for it, and it is required in many professions.
D
An employer typically pays for it in order to educate an employee.

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Financial Literacy — Test Answers — Economics