Personal Finance Final Exam Review

Front

The agreement to receive cash, goods or services now and pay for them later.

Back

Credit

Answer explanation

The correct answer is 'Credit' because it refers to the agreement to receive cash, goods, or services now and pay for them later, allowing consumers to make purchases without immediate payment.

Front

The amount of money you make per year

Back

Annual income

Answer explanation

The question asks for the amount of money made per year, which is defined as 'Annual income'. 'Monthly income' refers to earnings per month, while 'Monetary' is a general term and not specific to income.

Front

Example of a variable expense: Rent, Groceries, Health Insurance, Car Payment

Back

Groceries

Answer explanation

Groceries are a variable expense because their cost can fluctuate based on consumption and shopping habits. In contrast, rent, health insurance, and car payments are fixed expenses that remain constant each month.

Front

Which of the following is an example of a fixed expense? Rent, Groceries, Gas, Clothes

Back

Rent

Answer explanation

Rent is a fixed expense because it remains constant each month, unlike groceries, gas, and clothes, which can vary in cost.

Front

The least amount of money you can pay on a credit card per month.

Back

Minimum Payment

Answer explanation

The minimum payment is the least amount you can pay on a credit card each month to keep the account in good standing. It is not the credit limit, APR, or opportunity cost.

Front

Money owed to a person or a business

Back

Debt

Answer explanation

The term 'Debt' refers to money owed to a person or a business. It specifically indicates an obligation to pay back borrowed funds, distinguishing it from 'Debit' and 'Credit', which relate to accounting entries.

Front

The amount of interest you must pay for the credit you use in a given month

Back

Interest Rate

Answer explanation

The interest rate is the percentage charged on the amount of credit used, determining the interest you must pay for that credit in a given month. Thus, the correct answer is 'Interest Rate'.

Front

Income not spent

Back

Savings

Answer explanation

Income not spent is best described as 'Savings', as it refers to the portion of income that is set aside rather than used for immediate expenses. Other options do not accurately represent this concept.

Front

The reason someone is motivated to do something

Back

Incentive

Answer explanation

An incentive is a motivating factor that encourages someone to take action. In this context, it is the primary reason someone is motivated to do something, unlike debt or investment, which are not direct motivators.

Front

What is an advantage of using a credit card?

Back

You can use money that you might not have yet and pay it back later

Answer explanation

The correct choice highlights that credit cards allow you to access funds you may not currently have, enabling purchases and providing flexibility to pay back later, which is a key advantage.