Questions and Answers
What is a consumer?
A person or organization that uses a product or service.
Define credit.
The granting of a loan and the creation of debt; any form of deferred payment.
What is debt?
An obligation of repayment owed by one party to a second party.
What does economic refer to?
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What is financial literacy?
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What is interest?
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Define loan.
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What is personal finance?
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Which statement is true about learning the language of money?
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Which of the following is NOT a reason credit is marketed heavily to consumers in the United States?
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During the Great Depression, what did New Deal policymakers conclude about consumer credit?
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When it comes to managing money, what percentage is success attributed to head knowledge and behavior?
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Study Notes
Key Terms in Personal Finance
- Consumer: Individual or organization that purchases or uses goods and services.
- Credit: Granting of a loan, leading to the creation of debt; involves any form of deferred payment.
- Debt: Obligation to repay borrowed money, typically involving the principal amount plus interest.
- Economic System: Framework for the production and distribution of goods and services within a society.
- Financial Literacy: Essential knowledge and skills required to make informed financial decisions and manage personal finances effectively.
- Interest: Fee paid for borrowing money, usually calculated as a percentage of the principal amount.
- Loan: A debt documented by a note, outlining the principal, interest rate, and repayment date.
- Personal Finance: Encompasses all financial decisions and activities of individuals or families, including spending, saving, and budgeting.
Understanding Credit and Debt
- Importance of Credit: Heavily marketed due to strong consumer demand and the profitability of the credit industry; credit has become a social norm in the U.S.
- Consumer Credit Evolution: During the Great Depression, policies were developed to make consumer lending viable, helping establish mortgage and other loan options for the middle class.
Financial Knowledge and Behavior
- Learning Financial Language: Understanding financial concepts is crucial; reliance solely on financial planners may not be sufficient for effective money management.
- Money Management Success: Approximately 20% knowledge (head knowledge) and 80% behavior contribute to successful personal finance management.
Misconceptions about Credit
- Social Acceptance of Credit: The belief that credit use is not socially accepted is incorrect; credit is widely utilized and integrated into everyday financial practices.
Financial Literacy Importance
- Role in Consumer Behavior: Financial literacy empowers consumers to navigate economic systems confidently and make sound decisions regarding loans, credit, and personal finance management.
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Description
This quiz covers key terms and concepts from Unit 1 of the Dave Ramsey Foundations in Personal Finance High School Edition. Learn definitions related to consumer behavior, credit, and debt to enhance your understanding of personal finance.