Personal Finance

Front

How is gross pay calculated from hourly wages and hours worked?

Back

Gross pay is calculated by multiplying the hourly wage by the number of hours worked.

Answer explanation

Gross pay is calculated by multiplying the hourly wage by the number of hours worked. This formula accurately reflects the total earnings before any deductions.

Front

What is the difference between a normal work week and overtime?

Back

A normal work week is the standard number of hours an employee is expected to work (40 hours), while overtime refers to hours worked beyond the normal work week, usually paid at time and a half.

Answer explanation

The correct choice explains that a normal work week typically consists of 40 hours, while overtime refers to any hours worked beyond that, often compensated at a higher rate, such as time and a half.

Front

What is the difference between gross pay and net pay?

Back

Gross pay is the total earnings before deductions, while net pay is the amount left after all deductions have been taken out.

Answer explanation

The correct choice explains that gross pay is the total earnings before any deductions, while net pay is what remains after all deductions, such as taxes and benefits, have been subtracted.

Front

What is the difference between optional and mandatory payroll deductions?

Back

Optional payroll deductions are those that an employee chooses to have taken out, such as retirement contributions, while mandatory deductions are required by law, such as Social Security or Medicare.

Answer explanation

The correct choice explains that optional payroll deductions are chosen by employees, like retirement contributions, while mandatory deductions are legally required, such as Social Security and Medicare.

Front

Differentiate between a Form W-2 and Form W-4.

Back

Form W-2 reports annual wages and taxes withheld, while Form W-4 is used by employees to indicate tax withholding preferences.

Answer explanation

Form W-2 is issued by employers to report annual wages and taxes withheld, while Form W-4 is completed by employees to specify their tax withholding preferences. This distinction is crucial for understanding payroll processes.

Front

Understand what types of taxes are deducted from your paycheck. Options: Federal income tax, State income tax, Social Security tax, Medicare tax, Tariff, Value-added tax, Customs duty, Property tax, Sales tax, Excise tax, Capital gains tax, Estate tax, Gift tax

Back

Federal income tax, State income tax, Social Security tax, Medicare tax

Answer explanation

The correct answer includes taxes that are directly deducted from your paycheck: Federal income tax, State income tax, Social Security tax, and Medicare tax. Other options listed are not deducted from paychecks.

Front

Which of the following best reviews the functions of federal income tax, state income tax, Social Security, and Medicare?

Back

Federal and state income taxes fund general government operations, while Social Security and Medicare fund specific social programs for retirees and seniors, among other people.

Answer explanation

Federal and state income taxes support general government functions, while Social Security and Medicare specifically provide benefits for retirees and seniors, making the second choice the best review of their functions.

Front

What is a budget and how does it help you prioritize needs/wants and save for financial goals?

Back

A budget is a plan for managing your money by prioritizing needs and wants and saving for financial goals.

Answer explanation

A budget is essential for managing money effectively. It helps prioritize needs over wants and allocates funds for savings, ensuring you can achieve financial goals while maintaining control over spending.

Front

What is the role of emergency funds and how do they help you prepare for unexpected expenses?

Back

Emergency funds help you prepare for unexpected expenses by providing a financial safety net.

Answer explanation

Emergency funds serve as a financial safety net, allowing you to cover unexpected expenses without disrupting your budget. This is crucial for maintaining financial stability during emergencies.

Front

What is a credit limit and how does using a credit card affect your balance?

Back

A credit limit is the maximum amount you can spend on a credit card, and going above may incur an over-limit fee.

Answer explanation

A credit limit is the maximum amount you can spend on a credit card. If you exceed this limit, you may incur an over-limit fee. This choice correctly defines the credit limit and its implications on spending.