PFL Unit 3 Summative Assessment

What is inflation?

• The general interest rate of an economy

• The general decrease in prices over time

• The general increase in prices over time

• The general increase in interest rates over time

If the nominal interest rate on a loan is 10% and inflation is 3%. What is the real interest rate?

• 7%

• 10%

• 3%

• 13%

When inflation rates rise, what will happen to the average homebuyer in the market due to the change in interest rates?

• they will likely have to lower their budget as interest rates rise

• they can increase their budget as interest rates decrease

• the change will not affect their purchase because inflation and interest rates are not related

• interest rates are a fixed rate for all homebuyers so the change will not affect them in this instance

What is an I Bond?

• an interest bearing U.S. savings bond that doubles in value after 20 years

• a non interest bearing investment that outpaces inflation

• an interest bearing U.S. savings bond that pays interest meant to keep pace with inflation

• a safe non interest bearing investment meant to keep pace with inflation

Certificates of Deposits (CDs) typically earn higher interest than the other savings account for what reason?

• they are investments and risky

• they are contracts

• the bank has guaranteed money to use

• the money is liquid

A checking account is the most liquid type of bank account, while a certificate of deposit is the most _______ type of bank account.

• accessible

• asset

• solid

• safe

During an economic crisis the Fed might need to stimulate the economy and encourage spending. They would do this by:

• The Fed would most likely lower interest rates

• The Fed would most likely increase interest rates

• The Fed would not touch interest rates

• The Fed would decrease inflation

A person-to-person payment app would best be used in which of these situations?

• To give a donation to someone soliciting contributions outside the grocery store

• To buy school apparel with your school logo while shopping online

• To give a tip to the valet parking your car

• To repay your a family member who lent you money to go on a class trip

What is the biggest tax advantage to contributing money to a 529?

• it is tax deductible

• it is tax deferred

• it grows tax free

• it is deferred compensation

Which of the following statements is TRUE?

• The interest rate on your savings account will remain the same as long as you keep the account open

• You can choose the interest rate on your savings account, but only once per year

• The interest rate on your savings account will vary over time and be set by the bank

• The interest rate on your savings account will vary over time and be set by the government.