Personal Finance - Ch. 2 Quiz

Which of the following best describes discretionary spending?

• Discretionary spending is the same as net income.

• Discretionary spending refers to the money that must be paid.

• Discretionary spending refers to the money available after taxes are removed and any mandatory obligations have been covered.

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.

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.

What is the key to long-term budgeting success?

• Establishing the budgeting habit first, then adjust the spending habits

• Monitoring spending and adjust it as appropriate

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

• Including bills in budgeting plans

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

• Withdraw cash from his savings account

• Pass on the sale and stop spending money on groceries

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

• Use his 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?

• monthly prescription medicine

• groceries

• gasoline

• entertainment

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

• Spending is limited to available cash.

• 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

Which of the following best describes a living wage?

• The amount of money a person must earn to live above the poverty line

• A wage that supports an average standard of living

• The median income across the country

• The wages a person needs to pay for housing in his state