"I KNOW MONEY" Economic Concepts Pre-Test

What is scarcity?

• Scarcity is the desire for more goods than can be produced.
• Scarcity is the limited availability of resources to meet unlimited wants.
• Scarcity refers to the abundance of resources available.
• Scarcity means that resources are infinite and easily accessible.

Answer explanation

Scarcity means there are limited resources, so we must make choices about how to use them.

If you buy a video game, what is the opportunity cost?

• The fun you have playing the game

• The money you spent on the game

• The other things you could have bought with the same money

• The time you spend playing the game

Answer explanation

Opportunity cost is the value of the next best thing you give up when making a choice.

Why is compound interest called the "eighth wonder of the world"?

• It only benefits wealthy individuals.
• It allows money to grow exponentially over time.
• It is a method for losing money quickly.
• It is a fixed interest rate applied annually.

Answer explanation

Compound interest grows your money by earning interest on both your original savings and past interest.

If you save $100 a month starting at age 18, how will it help you by age 30?

• You will have less money than you saved

• You will have more money than you saved due to interest

• Saving at a young age makes no difference

• You will owe taxes on the money you saved

Answer explanation

Starting early allows your money to grow over time through compound interest.

What is the difference between gross pay and take-home pay?

• Gross pay is what you keep; take-home pay is before taxes

• Gross pay is your salary before taxes; take-home pay is after taxes

• Gross pay includes bonuses; take-home pay is your base salary

• Gross pay is what you earn from investments; take-home pay is from wages

Answer explanation

Gross pay is your total earnings, while take-home pay is what you keep after taxes and deductions.

Why is it important to track your "burn rate"?

• To know how much money you make each month

• To understand how much you spend and can save

• To see how quickly you can spend your entire paycheck

• To find out how much money is wasted on interest

Answer explanation

Tracking your burn rate helps you manage your spending and ensure you save enough.

Which is an example of a “need” and not a “want”?

• An iPhone upgrade

• A new pair of Jordan's

• A Netflix subscription

• Rent for your home

Answer explanation

Needs are essentials for survival, like housing, while wants are extras.

What is the Golden Rule of Money?

• Borrow money to increase your spending power.
• Spend less than you earn.
• Save every penny you earn without spending.
• Invest all your money in stocks.

Answer explanation

The rule emphasizes saving and managing money wisely to achieve financial stability

What is interest on a loan?

• A penalty for late payment on a loan.
• The total amount borrowed from the lender.
• A reward given for timely repayment of a loan.
• The fee charged by a lender for the use of borrowed money.

Answer explanation

Interest is the cost of borrowing money and is paid to the lender as a fee

Why is your credit score important?

• Credit scores are only relevant for renting apartments.
• A higher credit score guarantees a job offer.
• Your credit score is important because it impacts your ability to secure loans and favorable interest rates.
• Your credit score determines your social status.

Answer explanation

A good credit score makes it easier to get loans and favorable terms.