Personal & Family Finance State Test Review

What is the first step in the decision-making process?

• Evaluate alternatives

• Identify the decision

• Make a choice

• Implement the decision

It is necessary to evaluate the consequences of each alternative in the decision-making process.

• True

• False

Which of the following is an example of a long-term financial goal?

• Saving for a vacation

• Buying a car in five years

• Paying this month’s bills

• Saving for a new laptop

Passive income is money earned with little or no effort on the part of the recipient.

• True

• False

Which factor does NOT typically influence earning potential?

• Education level

• Industry demand

• Personal hobbies

• Work experience

What is the purpose of a budget?

• To track expenses only

• To plan for future expenses and savings

• To determine tax liability

• To limit spending on entertainment

A budget should include both fixed and variable expenses.

• True

• False

Which of the following is a benefit of having an emergency fund?

• It earns high interest

• It provides financial security during unexpected events

• It allows for impulse purchases

• It can be used to pay down debt

It is recommended to have three to six months’ worth of living expenses in an emergency fund.

• True

• False

Which investment typically has the highest risk and potential return?

• Savings accounts

• Bonds

• Stocks

• Certificates of deposit