Unit 2 Review

Which of the following best describes discretionary spending?

• Discretionary spending is the same as net income.

• Discretionary spending is the money that must be paid.

• Discretionary spending is what is left after taxes, other deductions, and mandatory obligations are subtracted from your gross pay.

• Discretionary spending refers to the money spent at a person’s own discretion, specifically on food or entertainment.

Which of the following is the best explanation for the ultimate purpose of money?

• Money exists to simplify exchanges.

• Money exists because people want to accumulate it, thus creating a demand.

• Money is nothing more than an IOU from the government.

• Money has intrinsic value and worth.

• Money has value based on what can be purchased with it.

Hunter is an intelligent businessman. He has a knack for recognizing a good deal. Hunter was very interested when his friend, Leo, was trying to sell his Xbox 360. Leo was only asking $75 for the console and two controllers. Although slightly used, everything worked and was in good condition. If Hunter closes the deal, according to the nature of exchange, what is the agreed value of the items?

• They are worth $75 because Hunter paid that amount.

• They are worth around $200, and Hunter got a great deal.

• The exact price can’t be determined because it is relative. They are worth more than $75 for Hunter, but at the time, they were worth less than $75 for Leo.

• Hunter and Leo can’t determine the worth of the used items because they didn’t compare the costs of the used items and new items.

• The market determines the value of the items based on supply and demand, so it doesn’t matter what value Hunter or Leo give them.

What is the key to long-term budgeting success?

• You have to form the habit of budgeting then adjust your spending habits

• You must monitor your spending and adjust it as appropriate

• Adjust spending habits then set a budget based on the adjustments

• Include bills in budgeting plans

• Make dramatic changes

When you consider what makes up a standard of living, which of the following best describes the difference between comfort and material goods?

• Material goods are items a person doesn’t have but really wants, and comfort relates to her level of physical and mental health.

• Material goods are objects that can be owned, whereas comfort might be the luxury versions or features of those objects.

• Comfort is purchasing power due to money and fame, whereas material goods are the specific things that can be bought with that money.

• Comfort is the ability to pay for wanted items, while material goods are the things necessary for survival.

Sasha is utilizing the envelope budget in an effort to build better habits. Her next paycheck doesn’t come for another three days, but she has already spent all of her grocery money. On her way home, she noticed that the local grocery store had spare ribs on sale for $0.50 a pound. Sasha could not pass that up. Which of the following options does she have if she is going to stick to the envelope budget?

• Withdraw cash from her savings account

• Pass on the sale and stop spending money on groceries

• Use her debit card and just take less money out of her account next time

• Use her credit card and pay it off later

Which of the following best describes intrinsic value?

• The price at which an item is bought or sold for

• The value an individual gives an item for personal reasons

• An item’s worth in comparison to something else

• The extent to which a person wants or needs an item

Which of the following is a fixed expense?

• Rent

• Groceries

• Gasoline

• Entertainment

Which of the following is a major advantage that comes from paying for things with cash?

• You can only spend what you have.

• Excessive spending is more likely to occur if a larger bill must be broken for a minor purchase.

• People tend to buy more things when using cash.

• If a person runs out of cash, she can easily make a withdrawal at an ATM.

Which of the following best describes relative value?

• The price at which an item is bought or sold for

• The value an individual gives an item for personal reasons

• An item’s worth in comparison to something else

• The extent to which a person wants or needs an item