GFL - State Practice Test

Aria noticed that the prices of groceries and other essentials have been steadily increasing over the past year. She is concerned about how this might affect her ability to save money and make financial decisions. Define inflation and explain its impact on economic and financial choices.

• A) Increase in the general price level

• B) Decrease in the purchasing power

• C) Both A and B

• D) None of the above.

Answer explanation

Inflation is defined as an increase in the general price level (A), which leads to a decrease in purchasing power (B). Therefore, the correct answer is C) Both A and B, as both statements accurately describe the effects of inflation.

Aria is exploring different ways to earn money. What are some sources of income she might consider?

• Salary, wages, commissions, and tips

• Only salary

• Only wages

• Only commissions.

Answer explanation

The correct choice includes multiple sources of income: salary, wages, commissions, and tips. Each of these represents different ways individuals can earn money, making this option the most comprehensive.

Liam just received his first paycheck and noticed a deduction labeled FICA. What effect does FICA have on his income?

• Increases income

• Decreases income

• No effect on income

• Only affects wages.

Answer explanation

FICA (Federal Insurance Contributions Act) taxes are deducted from employees' wages, which directly reduces their take-home income. Therefore, the correct choice is that FICA decreases income.

Aria is considering different post-secondary training options and wants to calculate the costs and analyze the return on investment (ROI) based on her career choices.

• Only tuition costs

• Tuition and living expenses

• Tuition, living expenses, and potential earnings

• None of the above

Answer explanation

To analyze ROI, consider all costs: tuition, living expenses, and potential earnings. This comprehensive approach provides a clearer picture of the financial benefits of post-secondary training, making the correct choice 'Tuition, living expenses, and potential earnings'.

Maya is planning for her future and wants to invest in a long-term retirement account. Which of the following options should she consider?

• IRA

• Savings Account

• Checking Account

• Certificate of Deposit

Answer explanation

An IRA (Individual Retirement Account) is specifically designed for long-term retirement savings, offering tax advantages. In contrast, savings and checking accounts are for general use, while a Certificate of Deposit is a short- to medium-term investment.

Priya is planning her monthly budget based on her projected income and expenses. She needs to categorize her expenses into fixed, variable, and _______ budget categories.

• Periodic

• Annual

• Monthly

• Daily

Answer explanation

The correct answer is 'Periodic' as it complements fixed and variable budget categories. Periodic budgets account for expenses that occur at regular intervals, making it essential for comprehensive budgeting.

Aiden is reviewing his credit report and wants to ensure he checks with all the major credit bureaus. Which of the following is NOT one of the three major credit bureaus?

• Equifax

• TransUnion

• Experian

• CreditOne

Answer explanation

CreditOne is not one of the three major credit bureaus. The major credit bureaus are Equifax, TransUnion, and Experian, which collect and maintain consumer credit information.

Arjun wants to know where he can access his legal right to a free annual credit report. Which of the following options should he choose?

• AnnualCreditReport.com

• FreeCreditReport.com

• CreditKarma.com

• MyCreditReport.com

Answer explanation

The legal right to a free annual credit report is provided by AnnualCreditReport.com, the only authorized source for this service under federal law. Other sites may offer credit reports, but not the mandated free annual report.

Charlotte is considering applying for a loan to buy a new car. She knows that her credit score will impact _______ in her personal finance.

• Loan approval

• Interest rates

• Insurance premiums

• All of the above.

Answer explanation

A credit score affects various aspects of personal finance, including loan approval, interest rates on loans, and insurance premiums. Therefore, the correct answer is 'All of the above.'

Emma is planning to buy her first home and wants to know what factors will be considered to qualify for homeownership. What are the primary homeownership qualification factors?

• Debt-to-income ratio

• Loan-to-value ratio

• Credit score

• All of the above.

Answer explanation

The primary homeownership qualification factors include the debt-to-income ratio, loan-to-value ratio, and credit score. All these factors are essential in determining a borrower's ability to secure a mortgage.