Understanding Different Sources of Income

What is earned income?

• A sudden or unexpected amount of money

• Income received from investments

• Money received for services or work performed

• Income earned without direct involvement

Answer explanation

Earned income refers to money received for services or work performed, distinguishing it from income received from investments or without direct involvement.

Which of the following is an example of passive income?

• Wages

• Salary

• Rental properties

• Royalties from books

Answer explanation

Rental properties is an example of passive income as it generates income without active involvement or effort from the owner.

What characterizes residual income?

• Receiving a sudden amount of money

• Getting paid after the work is completed

• Trading time for money

• Earning money through direct involvement

Answer explanation

Residual income is characterized by getting paid after the work is completed, rather than trading time for money or earning money through direct involvement.

Which of the following is NOT an example of earned income?

• Hourly wages

• Rental properties

• Money received for services

• Salary

Answer explanation

Rental properties are not an example of earned income because they are considered passive income from investments, not from active work or services.

What is windfall income?

• Income from ongoing business investments

• Money earned from a regular job

• A sudden or unexpected amount of money or valued items

• Income from selling information products

Answer explanation

Windfall income refers to a sudden or unexpected amount of money or valued items, not income from ongoing business investments, money earned from a regular job, or income from selling information products.

What is an example of passive income?

• Salary from a full-time job

• Dividend income from stocks

• Hourly wage from part-time work

• Commission from sales

What does earned income involve?

• Investing in stocks

• Trading time for money through working for someone else

• Renting out property

• Selling products online

How can windfall income impact an individual's financial situation in the long term?

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What is residual income also known as?

• Passive income

• Active income

• Investment income

• Salary income

Different types of income provide individuals with various financial opportunities and challenges to consider. What are some of the key factors to consider when evaluating income sources?