Economics Q2 9 Weeks Test Review

What is the purpose of creating a budget?

• To track income only and not expenses

• To track and manage income and expenses, prioritize spending, and achieve financial goals.

• To ignore financial goals and priorities

• To spend money without any plan

Explain the difference between fixed and variable expenses in a budget.

• Variable expenses are only for luxury items

• Fixed expenses are always higher than variable expenses

• Fixed expenses remain constant each month, while variable expenses can fluctuate based on usage or consumption.

• Fixed expenses are only for groceries

What factors affect a person's credit score?

• Number of siblings, favorite sport, and favorite vacation spot

• Favorite color, shoe size, and hair length

• Number of pets, favorite food, and favorite movie

• Payment history, credit utilization, length of credit history, new credit accounts, and types of credit used

Why is it important to make timely payments on credit accounts?

• To maintain a good credit score and avoid late fees or increased interest rates.

• To support the credit card company

• To impress friends and family

• To receive more credit offers

What are the different types of taxes that individuals may have to pay?

• Health tax, education tax, transportation tax, and communication tax

• Water tax, electricity tax, gas tax, and internet tax

• Income tax, property tax, sales tax, and capital gains tax

• Food tax, clothing tax, entertainment tax, and vacation tax

Explain the concept of tax deductions and how they can benefit individuals.

• Tax deductions reduce taxable income and lower the amount of tax owed.

• Tax deductions have no impact on taxable income or the amount of tax owed.

• Tax deductions only benefit the government and not individuals.

• Tax deductions increase taxable income and raise the amount of tax owed.

What are the benefits of having a savings account?

• Earn interest, safe storage, save for future goals

• Lose money, risky investment, no access to funds

How can compound interest help in growing savings over time?

• Compound interest has no impact on the growth of savings

• Compound interest allows the interest to be calculated on both the initial principal and the accumulated interest, leading to exponential growth of savings over time.

• Compound interest decreases the total amount of savings over time

• Compound interest only applies to large sums of money

What are the key components of a financial plan?

• Donating, shopping, traveling

• Budgeting, saving, investing, insurance, and retirement planning

• Eating out, entertainment, luxury items

• Spending, borrowing, gambling

Why is it important to regularly review and update a financial plan?

• To keep the financial advisor busy

• To impress friends and family

• To waste time and resources

• To reflect changes in income, expenses, goals, and market conditions.