Consumer Economics Final Post-Test

Front

Which is the BEST way to avoid running out of money? Options: Plan and set goals for your money., Invest in stocks and bonds., Avoid purchases for 30 days if running low., Save money in a bank savings account.

Back

Save money in a bank savings account.

Answer explanation

Saving money in a bank savings account provides a secure way to manage funds and avoid running out of money. It allows for easy access to cash while earning interest, unlike other options that may involve risks or temporary measures.

Front

Calculate your net worth by subtracting your from your.

Back

Liabilities from your Assets.

Answer explanation

To calculate your net worth, you need to subtract your Liabilities from your Assets. This gives you the total value of what you own after accounting for what you owe.

Front

What is essential to know for managing personal finances?

Back

How earning, budgeting, saving, spending, and giving affect your money.

Answer explanation

Understanding how earning, budgeting, saving, spending, and giving impact your finances is crucial for effective personal finance management. This knowledge helps you make informed decisions about your money.

Front

If your assets are more than your liabilities, your net worth is ______.

Back

Positive

Answer explanation

If your assets exceed your liabilities, it means you have more resources than debts, resulting in a positive net worth. Therefore, the correct answer is 'Positive'.

Front

What is the first step to overcoming cognitive bias?

Back

Acknowledge they exist and you have them.

Answer explanation

The first step to overcoming cognitive bias is to acknowledge their existence. Recognizing that we all have biases allows us to critically evaluate our thoughts and decisions, leading to better choices.

Front

Which of the following is a Cognitive Bias in financial decisions?
Options:
It Won't Be That Bad (IWTBT),
No Fun, Only Save (NFOS),
Fear of Missing Out (FOMO),
Cross Your Fingers and Hope (CYFH)

Back

Fear of Missing Out (FOMO)

Answer explanation

Fear of Missing Out (FOMO) is a cognitive bias where individuals make financial decisions based on the fear of missing potential gains, often leading to impulsive actions. It highlights emotional influences on financial choices.

Front

What are the best reasons to save money?

Back

For emergencies, large purchases, and building wealth.

Answer explanation

Saving money is crucial for emergencies, allowing you to handle unexpected expenses. It also enables large purchases and helps in building wealth over time, ensuring financial stability and future security.

Front

The first thing that Michael should do is set up a monthly______________.

Back

Budget

Answer explanation

The first thing Michael should do is set up a monthly budget. A budget will help him track his income and expenses, ensuring he can manage his rent, student loans, and other financial responsibilities effectively.

Front

Michael needs an emergency fund that covers at least _______________ of his income.

Back

3-6 months

Answer explanation

Michael should aim for an emergency fund that covers 3-6 months of his income. This duration provides a sufficient buffer for unexpected expenses or loss of income, ensuring financial stability during emergencies.

Front

Why is tracking your expenses important?

Back

It shows if you’re sticking to your budget.

Answer explanation

Tracking your expenses is crucial as it helps you determine if you are adhering to your budget. This awareness allows for better financial decisions and adjustments to spending habits.