Effects of Economic Conditions and Government Policies on Financ

What is the main reason people must make choices in financial planning?

• Unlimited wants

• Abundance of resources

• Scarcity of resources

• Fixed income

What is opportunity cost in financial decision-making?

• The cost of an item

• The total savings

• The benefit of a choice

• What is given up to have something else

How does inflation affect personal financial planning?

• It has no effect

• It stabilizes prices

• It decreases purchasing power

• It increases purchasing power

What is a suggested safeguard against inflation for savings?

• Spending all income

• Saving in a regular savings account

• Investing in stocks and bonds

• Keeping cash at home

What is deflation?

• An increase in wages

• A stable price level

• A decline in the level of prices

• A rise in the level of prices

What is the best safeguard against unemployment affecting financial goals?

• Investing in stocks

• Taking a loan

• Having an emergency fund

• Spending more

How do government policies affect personal financial planning?

• They have no effect

• They only affect businesses

• They influence interest rates and credit availability

• They only affect taxes

What should savers and borrowers consider when evaluating the cost of borrowing and saving?

• Nominal interest rates

• Real interest rates

• The duration of savings

• The amount of loan