Consumer Economics Final Post-Test

Which is the BEST way to avoid running out of money?

• Plan and set goals for your money.

• Invest in stocks and bonds.

• Avoid purchases for 30 days if running low.

• Save money in a bank savings account.

Answer explanation

Saving money in a bank savings account provides a secure way to manage funds and avoid running out of money. It allows for easy access to cash while earning interest, unlike other options that may involve risks or temporary measures.

Calculate your net worth by subtracting your from your.

• Subtract your Liabilities from your Assets.

• Add your Liabilities to your Assets.

• Multiply your Liabilities by your Assets.

• Divide your Assets by your Liabilities.

Answer explanation

To calculate your net worth, you need to subtract your Liabilities from your Assets. This gives you the total value of what you own after accounting for what you owe.

Jeremy is surprised to find his bank balance at $15. He thought he calculated his expenses correctly. He's upset with his parents for making him pay for a broken TV remote and worries about borrowing money to go to the movies with friends.

• Constantly blaming others if things don't go your way

• Attributing other peoples success to luck

• Assuming that you are always correct

• Fear of Missing Out (FOMO)

• Sunken Cost Fallacy

Answer explanation

Jeremy's frustration with his bank balance and blaming his parents shows he often blames others when things go wrong. His worry about missing out on movies indicates a Fear of Missing Out (FOMO), and he assumes his calculations were correct.

What is essential to know for managing personal finances?

• How earning, budgeting, saving, spending, and giving affect your money.

• How to make bank deposits using registers.

• How investing in stocks defines your portfolio.

• How consumer decisions affect your accounts.

Answer explanation

Understanding how earning, budgeting, saving, spending, and giving impact your finances is crucial for effective personal finance management. This knowledge helps you make informed decisions about your money.

If your assets are more than your liabilities, your net worth is ______.

• Positive

• Negative

• Zero

• Neutral

Answer explanation

If your assets exceed your liabilities, it means you have more resources than debts, resulting in a positive net worth. Therefore, the correct answer is 'Positive'.

What is the first step to overcoming cognitive bias?

• Make different choices than your first thought.

• "Trust your gut" when deciding.

• No need to overcome cognitive bias.

• Acknowledge they exist and you have them.

Answer explanation

The first step to overcoming cognitive bias is to acknowledge their existence. Recognizing that we all have biases allows us to critically evaluate our thoughts and decisions, leading to better choices.

Which of the following is a Cognitive Bias in financial decisions?

• It Won't Be That Bad (IWTBT)

• No Fun, Only Save (NFOS)

• Fear of Missing Out (FOMO)

• Cross Your Fingers and Hope (CYFH)

Answer explanation

Fear of Missing Out (FOMO) is a cognitive bias where individuals make financial decisions based on the fear of missing potential gains, often leading to impulsive actions. It highlights emotional influences on financial choices.

Select all statements necessary to control your personal finances.

• Your financial goals.

• Your income.

• Your financial advisor's phone number.

• A plan to reach your goals.

• Your expenses.

Answer explanation

To control personal finances, you need to know your financial goals, income, and expenses, and have a plan to reach those goals. The financial advisor's phone number is not essential for this control.

What are the best reasons to save money?

• To Invest, indulge, and influence others.

• Afford your dream home, car, and vacation.

• For emergencies, large purchases, and building wealth.

• Buy gifts, donate, and save for kids' college.

Answer explanation

Saving money is crucial for emergencies, allowing you to handle unexpected expenses. It also enables large purchases and helps in building wealth over time, ensuring financial stability and future security.

Michael Page is 22 and a recent college graduate. He just got his first job as an accountant with an income of 35,000. He plans to buy a 3-year-old Honda Accord and share an apartment, paying 595 in rent per month. He also has student loans to pay off in five years. Michael wants to start off “right” financially.

The first thing that Michael should do is set up a monthly______________.

• Budget

• Income Statement

• Balance Sheet

• Income Evaluation

Answer explanation

The first thing Michael should do is set up a monthly budget. A budget will help him track his income and expenses, ensuring he can manage his rent, student loans, and other financial responsibilities effectively.