Economics Unit 6 Quiz & Flashcards on Bank Balance

Questions and Answers

What questions should Amanda ask before buying a new car? (Select three options)

Will this new vehicle help me make new friends?

Will buying this car prevent me from saving money to buy a house? (correct)

What will my friends think when I buy this car?

Is this a reliable vehicle? (correct)

Do I need this car or should I use my old car a little longer? (correct)

What is a money market account?

A type of savings account that typically offers a higher interest rate.

Which best describes what financial planning skills ultimately enable an individual to do?

to prepare for the future

According to the table, what is Omar's bank balance?

$761.25 Signup and view all the answers

Which of these is a characteristic of certificates of deposit (CDs)?

They last for a set period of time. Signup and view all the answers

How do long-term goals differ from short-term goals?

Long-term goals require more planning than short-term goals do. Signup and view all the answers

In American society, which of these is an example of a want?

video games Signup and view all the answers

What will Sara need to open a bank account? (Check all that apply)

Proof of address Signup and view all the answers

What best determines whether a borrower's investment on an adjustable rate loan goes up or down?

A market's condition Signup and view all the answers

Which statements describe Emma's financial skills? (Select three options)

Emma is better prepared to avoid financial setbacks. Signup and view all the answers

What is the correct order of the four steps in solving one's personal financial challenges?

4, 1, 2, 3 Signup and view all the answers

What is the compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate?

$33.10 Signup and view all the answers

The type of credit people are most likely to use for small purchases during their lifetime is?

A credit card Signup and view all the answers

Which would be most helpful when considering a large expenditure that might require repeating payments? (Select three options)

learning about opportunity cost Signup and view all the answers

Personal finance skills have the most significant impact on an individual's?

quality of life Signup and view all the answers

A credit score between 500 and 600 means a consumer would most likely?

Find it hard to get a loan Signup and view all the answers

The simple interest on a loan of $200 at 10 percent interest per year is?

$20 per year until the loan is paid off Signup and view all the answers

When studying finance or economics, the cost of a decision is also known as?

opportunity cost Signup and view all the answers

Which describes an example of using unsecured credit?

Someone buys new gutters for a home with a credit card. Signup and view all the answers

A __________ is a plan in which an individual balances available resources and expenses.

budget Signup and view all the answers

In Texas, the graph compares the total cost of attending what type of educational institutions?

four-year universities Signup and view all the answers

A credit score is based in part on?

Payment history and total debt Signup and view all the answers

This graph shows that private universities can cost how much more than public universities?

three times as much Signup and view all the answers

A way to build good credit is?

Paying bills when they are due Signup and view all the answers

Which educational institutions typically cost the most to attend?

private colleges Signup and view all the answers

In determining whether to issue a loan, banks are not allowed to ask about an applicant's?

Country of origin Signup and view all the answers

Simple interest is paid only on the __________.

principal borrowed Signup and view all the answers

What trend does the student loan debt graph demonstrate?

Students have taken out higher and higher loans since 1994. Signup and view all the answers

What helps explain why many students might choose an alternative living situation over paying room and board at a four-year institution?

many students might choose an alternative living situation over paying room and board at a four-year institution. Signup and view all the answers

When an insurance company needs to provide a payout, the money is removed from?

A pool of funds Signup and view all the answers

Which statement describes an hourly wage job?

If an employer wants the employee to work more hours in a week, the result is a larger paycheck. Signup and view all the answers

What is the $25 fee Maria's mother paid when she visited the doctor?

Co-payment Signup and view all the answers

Insurance companies create a pool of funds to handle __________.

risk Signup and view all the answers

How is a student loan different from a scholarship?

A student loan must be paid back, but a scholarship is not paid back. Signup and view all the answers

Which is always a cost when buying insurance?

Premium Signup and view all the answers

Which statement best explains a grant?

A grant is money awarded to a student, usually based on financial need. Signup and view all the answers

Work-study is a program that includes?

taking a school job to help pay for an education. Signup and view all the answers

What must happen for an insurance company to make a payout? (Check all that apply)

The insured party must file a claim. Signup and view all the answers

Which statement best defines tuition?

Tuition is the price of attending classes at a school. Signup and view all the answers

What type of risk management is keeping backup funds in a savings account?

Reducing risk Signup and view all the answers

In the pie chart showing a sample weekly budget, how much money is going toward optional expenses?

$70 Signup and view all the answers

In what circumstance would a property insurance claim be rejected?

The insurance company finds that a homeowner intentionally caused damage. Signup and view all the answers

To change gross income, someone would need to?

earn more money. Signup and view all the answers

Why does insurance often provide 'peace of mind'?

People are less worried when they know they have protection from risk. Signup and view all the answers

Why is net income lower than gross income?

withholdings Signup and view all the answers

What is the $75 payment Nelson must make each month for his car insurance?

Premium Signup and view all the answers

Under which circumstance would someone need disability insurance?

A person was in a car accident and cannot work for several months. Signup and view all the answers

A short-term financial goal might include saving for?

a piece of furniture. Signup and view all the answers

Why might variable expenses change a great deal at different times of year?

Heating and cooling costs might vary considerably. Signup and view all the answers

Which is the most important consideration when deciding to purchase or lease a vehicle?

All current monthly expenditures Signup and view all the answers

Look at this monthly budget. How much can Tokuji increase his discretionary spending if he increases savings to $110?

$20 Signup and view all the answers

Which fixed expense would be most difficult to change if money is needed for car payments?

Rent Signup and view all the answers

From what part of income should someone take savings?

what otherwise would be discretionary income Signup and view all the answers

What is a main disadvantage of leasing a vehicle compared to buying a vehicle?

The up-front cost Signup and view all the answers

What should Joann do next according to the decision-making process after deciding to purchase a new car?

Research available cars for sale. Signup and view all the answers

Which is an example of an income deduction?

retirement savings Signup and view all the answers

What is the simplest change that can be made to the budget to produce more savings next month?

Decrease food expenses. Signup and view all the answers

Which expense category will most likely be changed to allow money for the purchase of a car?

Entertainment Signup and view all the answers

Marlene has decided to save $3,500 to attend community college. Which step in the decision process should she take?

Take action. Signup and view all the answers

When should fixed and variable monthly budgeted expenses first be planned?

at the start of each month Signup and view all the answers

What is the most acceptable and easy way to revise a budget to allow for the purchase of a new couch?

Cook dinners at home instead of going out to eat. Signup and view all the answers

Which activity is done in Step 2 of comparison shopping?

Assess the purchase objectively. Signup and view all the answers

At what point does buying in bulk stop being a wise spending choice?

when the consumer buys more than is needed Signup and view all the answers

Buying a new car can create a financial challenge because?

Car payments must become part of the budget. Signup and view all the answers

When revising a budget, it is important to make choices that allow you to continue __________ money.

saving Signup and view all the answers

For which product(s) would it be most beneficial to wait before buying?

smartphone Signup and view all the answers

What illustrates the most economically sound choice for Brad?

buying both a car and a home Signup and view all the answers

Some major considerations when deciding on housing are needs and __________.

budget Signup and view all the answers

Which describes a set amount of pay received by a worker over the course of a year?

Salary Signup and view all the answers

Which details apply to a financing contract? (Select all that apply)

includes interest rate information Signup and view all the answers

What is most likely Yuri's motivation behind buying the pricier pair of jeans?

Conspicuous consumption Signup and view all the answers

Which statements apply to leasing a car? (Select all that apply)

There are penalties for ending the lease early. Signup and view all the answers

What is most likely to happen to consumers with good credit? (Check all that apply)

They can receive lower interest rates. Signup and view all the answers

Which strategy best helps a famous brand company reach consumers?

advertising nationally Signup and view all the answers

What is the job outlook for a US postal worker?

The career is shrinking and will provide fewer opportunities over time. Signup and view all the answers

What is the purpose of comparison shopping?

attempting to find the best deal on a product Signup and view all the answers

What is one difference between a vocational school and on-the-job training?

On-the-job training is usually paid for by the employer. Signup and view all the answers

A monthly fixed rate mortgage payment?

never changes Signup and view all the answers

Why were savings and loans (S&Ls) originally established?

To help people buy homes Signup and view all the answers

The point at which it is no longer advantageous to buy in bulk is known as marginal?

benefit Signup and view all the answers

Which describes a type of tax that funds city programs?

local income tax Signup and view all the answers

Through the successful study of personal finance, an individual will be?

Better prepared for potential problems. Signup and view all the answers

Based on the sales receipt, what is the sales tax rate in Sacramento, California?

8.5 percent Signup and view all the answers

If a new shirt costs $34.99 and the sales tax is $2.10, the sales tax rate is?

6 percent Signup and view all the answers

Sales tax is calculated?

using a percentage of the price of an item. Signup and view all the answers

If having a warranty on a car is important, a person should buy a car that is __________.

new Signup and view all the answers

Which detail is most likely to give consumers a false sense of security about using Edgozene?

Our proven supplement Signup and view all the answers

Which best summarizes the purpose of a W-4 form?

It helps determine the amount of taxes withheld from an individual's paycheck. Signup and view all the answers

Which are types of income tax that people pay? (Select all that apply)

local Signup and view all the answers

A federal payroll tax that supports retired workers is?

social security tax. Signup and view all the answers

If a home is valued at $250,000 and the property tax rate is 2 percent, how much will the owners pay in property taxes?

$5,000 Signup and view all the answers

The document shows a 1040 form. What is the 1040 form used to collect?

federal tax Signup and view all the answers

What does the revenue diagram from federal income taxes show?

The most revenue comes from individual and payroll taxes. Signup and view all the answers

Sales tax is calculated by multiplying the price of an item by the __________.

tax rate Signup and view all the answers

Many checking accounts offer multiple ways of accessing money in addition to checks. Which of these can be used to access money in a checking account?

debit card Signup and view all the answers

In which situation would a certificate of deposit (CD) be the best banking choice?

Hafsa wants a guaranteed return, and won't need the money for several years. Signup and view all the answers

Where do banks get money to lend to borrowers?

their depositors Signup and view all the answers

Which of these is the best reason for Nina to maintain up-to-date and accurate records of her bank accounts?

to know how much money she has for budgeting Signup and view all the answers

What type of banking institution is most suitable for Glenn and Maggie's business?

a commercial bank Signup and view all the answers

In which situation would a savings bond be the best investment to earn interest?

if you are putting aside a chunk of money to purchase a house in five years Signup and view all the answers

Sofia has saved $10,000. What type of account is most suitable for Sofia's needs?

savings account Signup and view all the answers

Study Notes

Financial Decision-Making

Questions to consider before purchasing a car: necessity versus existing vehicle, reliability of the new vehicle, impact on savings for future investments like a house.
Financial planning skills enable individuals to prepare for their financial future.

Goals and Needs

Long-term goals require more planning compared to short-term goals.
Distinction between wants (e.g., video games) and needs (e.g., food).

Saving and Budgeting

Effective budgeting prepares individuals for basic needs, emergencies, and financial setbacks.
Four steps in personal financial challenges: assessing needs/wants, setting goals, considering opportunity costs, and assessing risks and returns.

Expenditures and Income

Understanding variable expenses, which can fluctuate seasonally (e.g., heating and cooling costs).
Savings should ideally come from discretionary income, after budgeting for fixed expenses.

Education Costs

Cost of education varies significantly between institutions: private universities can be three times more expensive than public ones.
Community colleges are often more affordable compared to four-year universities.

Financial Instruments

Student loans need to be repaid, unlike grants and scholarships.
Work-study helps students pay for education through school jobs, contrasting with loans or grants.

Taxes and Income

Net income is lower than gross income due to withholdings, which include taxes.
Understanding the implications of sales tax: calculated as a percentage of an item's price.

Banking and Accounts

A budget is a plan balancing resources and expenses; using a debit card can facilitate access to checking accounts.
A certificate of deposit (CD) offers guaranteed returns for money not needed immediately.

Credit and Loans

Types of credit include credit cards, personal loans, and mortgages; credit cards are often used for small purchases.
Credit scores indicate the likelihood of loan approval; a score between 500 and 600 signals difficulty in obtaining loans.

General Financial Knowledge

Essential to maintain accurate records for budgeting and financial planning.
Comparison shopping is meant to ensure the best purchase decision by evaluating prices and products.

Investment and Interest

Compound interest on loans accumulates over time; for example, $100 at a 10% interest rate over three years yields $33.10 in interest.
Fixed-rate mortgage payments remain constant over time, unlike variable-rate loans that may fluctuate based on market conditions.

Characteristics of Taxes

Local income taxes fund city programs, while social security tax supports retired workers.
The 1040 form is key for federal tax reporting.

Financial Well-Being

Financial literacy significantly impacts quality of life, encouraging smart decision-making and goal setting.
Understanding the nature of fixed and variable expenses is crucial for effective personal finance management.### Loan Payment Overview
Various yearly payment options until a loan is paid off include $15, $20, and $25.

Unsecured Credit Example

Using a credit card to buy home gutters exemplifies unsecured credit.

Credit Score Components

A credit score partially relies on payment history and total debt.

Building Good Credit

Paying bills on time is essential for building good credit.

Loan Application Guidelines

Banks cannot inquire about an applicant's country of origin during the loan application process.

Simple Interest

Simple interest is only paid on the principal borrowed amount.

Insurance Payout Sources

When insurance payouts are needed, the money comes from a pool of funds created by the insurance company.

Health Insurance Plan Costs

A co-payment is the fee paid during doctor visits, while deductibles are the initial amounts paid before bills are covered by insurance.

Insurance Risk Management

Insurance companies create a pool of funds to manage risk.

Insurance Premiums

The premium is a consistent cost associated with buying insurance.

Claim Requirements for Insurance Payout

For an insurance payout, the insured must file a claim, verify it, and experience a covered loss. An active policy is also necessary.

Risk Management Strategy

Keeping backup funds in a savings account to offset business losses is an example of reducing risk.

Insurance Claim Rejection

A homeowner's intentional damage will lead to claim rejection by the insurance company.

Psychological Benefits of Insurance

Insurance provides "peace of mind" as it offers protection from risks.

Monthly Insurance Payment

A subscription cost, like a car insurance premium, is a recurrent expense paid each month.

Disability Insurance Requirement

Disability insurance is essential for individuals unable to work due to injuries like car accidents.

Vehicle Purchase or Lease Considerations

Evaluating all current monthly expenditures is crucial when considering buying or leasing a vehicle.

Fixed Expense Difficulty

Rent is typically the hardest fixed expense to change when needing extra funds.

Leasing vs. Buying Vehicles

A primary disadvantage of leasing is the higher upfront costs compared to buying.

Decision-Making Steps for Car Purchase

Researching available cars for sale is the next step after deciding to purchase a new car.

Budget Adjustment Strategies

Reducing entertainment expenses is a common method to adjust a budget for a car purchase.

Challenges of Buying a New Car

Car payments must be integrated into the budget, making it financially challenging.

Budget Revision Focus

It's important to make budget revisions that allow for continued saving.

Housing Considerations

Budget is a critical consideration alongside needs when deciding on housing.

Salary Definition

Salary refers to a fixed amount of pay received by a worker annually.

Consumer Spending Motivations

Purchasing expensive items, like designer jeans, can stem from conspicuous consumption motives.

Benefits of Good Credit

Individuals with good credit can secure loans, receive lower interest rates, and have credit available for emergencies.

Career Outlook for Postal Workers

The job outlook for US postal workers indicates a shrinking career with fewer opportunities.

Vocational School vs. On-the-Job Training

Vocational school is generally paid for by the student, while on-the-job training is typically funded by the employer.

Purpose of Savings and Loans

Savings and loans (S&Ls) were established primarily to assist individuals in buying homes.

Personal Finance Study Benefits

Studying personal finance leads to better preparedness for potential financial problems.

Sales Tax Rate in Sacramento

The sales tax rate in Sacramento, California is 8.5 percent.

Car Warranty Consideration

It is advisable to buy a new car if having a warranty is important.

Misleading Advertising Claims

Claims such as "our proven supplement" can create a false sense of security in marketing materials.

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Description

This study guide focuses on key economic concepts for making informed purchasing decisions, using the example of buying a new car. It helps learners understand the important questions to consider such as reliability, necessity, and financial implications before making a significant purchase.

Economics Unit 6 Study Guide