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Chapter 3 Earnings and Income Test

Total questions: 78

Worksheet time: 4hrs 54mins

Name
Class
Date
1.

To accumulate wealth, you need to generate a(n)?

a)

Surplus.

b)

Deficit.

c)

Expense.

d)

Loan.

2.

Which of the following refers to the money left over after all of your expenses have been paid?

a)

Surplus

b)

Deficit

c)

Net worth

d)

Assets

3.

Which of the following refers to expenses exceeding income?

a)

Surplus

b)

Deficit

c)

Net worth

d)

Assets

4.

Which of the following indicates the percentage of income that you are actively saving?

a)

Surplus

b)

Deficit

c)

Net worth

d)

Savings ratio

5.

Which of the following is the same as a savings ratio over a specific time period?

a)

Surplus.

b)

Deficit.

c)

Targeted savings ratio.

d)

Assets.

6.

Which of the following indicates the percentage of your income that you are spending to pay down your debts?

a)

Surplus.

b)

Total debt to income ratio.

c)

Targeted savings ratio.

d)

Savings ratio.

7.

Which of the following refers to having your employer take money automatically from your paycheck and contribute it directly to a retirement savings plan or a savings account?

a)

Payroll deduction.

b)

Total debt to income ratio.

c)

Targeted savings ratio.

d)

Savings ratio.

8.

Which of the following is the recommended targeted saving rate if you are under age 30?

a)

10%

b)

12%

c)

15%

d)

20%

9.

Which of the following is the recommended targeted saving rate if you are between age 30 and 40?

a)

10%

b)

12%

c)

15%

d)

20%

10.

Which of the following is the recommended targeted saving rate if you wait until age 40 to start saving?

a)

10%

b)

12%

c)

15%

d)

20%

11.

Which of the following may result from overspending?

a)

More saving.

b)

More borrowing.

c)

Increased net worth.

d)

Decreased liabilities.

12.

What should you do to accumulate wealth?

a)

Accumulate a surplus.

b)

Begin saving the surplus as early as possible.

c)

Keep your money working for you as long as possible.

d)

All of these answer choices are correct.

13.

Which of the following is the formula for calculating the savings ratio?

a)

Savings/Income.

b)

Savings/Expenses.

c)

Income/Savings.

d)

Expenses/Savings.

14.

Which of the following refers to your income before any taxes or other expenses are deducted from your paycheck?

a)

Annual income.

b)

Salary.

c)

Gross income.

d)

Net pay.

15.

Which of the following describes all sources of money obtained by individuals and households?

a)

Income.

b)

Gross income.

c)

Wage.

d)

Bonus.

16.

Which of the following refers to compensation received for services performed for an employer?

a)

Income.

b)

Earnings.

c)

Wage.

d)

Bonus.

17.

Which of the following is what employers pay for an employee to complete a task?

a)

Income.

b)

Earnings.

c)

Salary.

d)

Wage.

18.

Which of the following is a payment for a set period of time such as a month or year?

a)

Income.

b)

Earnings.

c)

Salary.

d)

Wage.

19.

Which of the following is a payment based on the sale of a product or service?

a)

Income.

b)

Bonus.

c)

Salary.

d)

Commission.

20.

The most common wage is based on which of the following?

a)

Income.

b)

Hourly.

c)

Salary.

d)

Annually.

21.

Which of the following is defined as working more than 40 hours in one week?

a)

Income.

b)

Bonus.

c)

Commission.

d)

Overtime.

22.

How much will Mia earn per week given the following information? Works 45 hours per week; $12 base rate per hour and overtime for any work over 40 hours per week.

a)

$540.

b)

$570.

c)

$600.

d)

$480.

23.

How are those who graduate from college and work in a professional field typically paid?

a)

Income

b)

Hourly

c)

Salary

d)

Annually

24.

Jorge earns $20 per hour. He works 40 hours per week and takes 2 weeks of paid vacation each year. How much does Jorge earn per year, assuming that he does not receive overtime pay?

a)

$40,000

b)

$41,600

c)

$46,000

d)

$51,000

25.

Which of the following refers to earning income from a business that you operate?

a)

Employed

b)

Self-employed

26.

What percent of self-employed individuals have one or more employees working for them?

a)

25%

b)

30%

c)

35%

d)

40%

27.

What percent of all workers in the United States are self-employed?

a)

5%

b)

10%

c)

15%

d)

25%

28.

Which of the following is a characteristic of a self-employed individual?

a)

Wanting to be his or her own boss.

b)

Possessing a strong sense of individual responsibility.

c)

Placing a high emphasis on individual effort.

d)

All of these answer choices are correct.

29.

What percent of Social Security and Medicare taxes is an individual responsible for paying if they are self-employed and considered an independent contractor?

a)

10%

b)

20%

c)

50%

d)

100%

30.

The small business survival rate ______ over time?

a)

increases.

b)

declines.

c)

stays the same.

d)

None of these answer choices are correct.

31.

What is the default legal structure of a self-employed individual?

a)

Proprietorship.

b)

Partnership.

c)

Sole Proprietorship.

d)

Employer.

32.

Which of the following refers to being totally responsible for paying all liabilities a business incurs?

a)

Unlimited liability.

b)

Limited liability.

c)

Bankruptcy.

d)

Self-employed.

33.

Which of the following is the most basic type of partnership?

a)

Limited partnership.

b)

Limited liability partnership.

c)

General partnership.

d)

Sole proprietor.

34.

Which of the following refers to a partnership where there is a general partner who manages the business and one or more limited partners that simply invest money into the partnership and are not involved in the day-to-day management?

a)

Limited partnership.

b)

Limited liability partnership.

c)

General partnership.

d)

Sole proprietor.

35.

Which of the following type of partnership is often used by doctors, attorneys, and accountants?

a)

Limited partnership.

b)

Limited liability partnership.

c)

General partnership.

d)

Sole proprietor.

36.

Which of the following shields the personal assets of the owner(s) from the liabilities of the business?

a)

Limited partnership.

b)

Limited liability partnership.

c)

Limited liability company.

d)

General partnership.

37.

Which of the following refers to a legal structure that is separate from the owners of the business?

a)

Limited partnership.

b)

Corporation.

c)

General partnership.

d)

Sole proprietor.

38.

What type of partnership is designed for professionals working in a partnership so that partners will not be held liable for the negligent actions (and resulting liabilities) of other partners but they will still be liable for the general obligations of the business?

a)

Limited partnership.

b)

Limited liability partnership.

c)

Limited liability company.

d)

General partnership.

39.

Which of the following refers to money you receive from work?

a)

Earned income.

b)

Unearned income.

c)

Bonus.

40.

Which of the following refers to money you receive from financial capital?

a)

Earned income.

b)

Unearned income.

c)

Bonus.

d)

Commission.

41.

Which of the following refers to a combination of earned and unearned income?

a)

Salary.

b)

Commission.

c)

Bonus.

d)

Total income.

42.

When you stop working and retire, your total income will consist primarily of ______ income sources.

a)

earned.

b)

unearned.

c)

employment.

d)

commission.

43.

Which of the following is a source of unearned income?

a)

Dividends.

b)

Interest from savings accounts.

c)

Social Security benefits.

d)

All of these answer choices are correct.

44.

Which of the following is a way that an individual may make money during their lifetime?

a)

Employment.

b)

Lending.

c)

Investing.

d)

All of these answer choices are correct.

45.

Which of the following refers to an investor’s share of the profits?

a)

Salary.

b)

Bonus.

c)

Dividend.

d)

Commission.

46.

Which of the following can be measured using probabilities and can often be quite high?

a)

Subjective risk.

b)

Objective risk.

c)

Risk.

d)

Dividends.

47.

Which of the following refers to personally developed probabilities of potential losses based on expectations, fear, worry, and other factors?

a)

Subjective risk.

b)

Objective risk.

c)

Risk.

d)

Dividends.

48.

Which of the following varies from one person to another?

a)

Subjective risk.

b)

Objective risk.

c)

Risk.

d)

Dividends.

49.

Which of the following tells you how long it will take to double your money?

a)

Subjective risk.

b)

Objective risk.

c)

Rule of 72.

50.

Which of the following are sources of unearned income?

a)

Lottery winnings.

b)

Proceeds from a savings bond.

c)

Government benefits.

d)

All of these answer choices are correct.

51.

Which of the following are sources of earned income?

a)

Lottery winnings.

b)

Proceeds from a savings bond.

c)

Government benefits.

d)

Labor markets.

52.

Which of the following refers to almost everything you own or use for personal or investment purposes?

a)

Capital

b)

Capital asset

c)

Bonus

d)

Dividend

53.

Which of the following is a capital asset?

a)

Your home.

b)

Your car.

c)

Your investments.

d)

All of these answer choices are correct.

54.

Which of the following happens when you sell an asset for more than you paid for it?

a)

Capital gain.

b)

Capital loss.

c)

Dividends.

d)

You break even on the sale.

55.

Which of the following happens when you sell an asset for less than you paid for it?

a)

Capital gain.

b)

Capital loss.

c)

Dividends.

d)

You break even on the sale.

56.

Which of the following capital losses can be reported to the Internal Revenue Service and may reduce your tax liability?

a)

Sale of a home.

b)

Sale of a car.

c)

Sale of an investment.

d)

Sale of clothes.

57.

At what point in time may you have to be taxed on an investment?

a)

When the investment increases in value.

b)

When the investment decreases in value.

c)

Every tax year.

d)

When you sell or exchange the investment asset.

58.

You purchased an apartment building for 100,000 and sold it 3 years later at 120,000. You paid 5% to the real estate agent who listed the property. How much is your realized gain?

a)

$120,000.

b)

$20,000.

c)

$14,000.

d)

$100,000.

59.

Which of the following illustrates the concept of capital gains?

a)

You buy or somehow obtain an asset.

b)

You hold the asset for some length of time, usually to allow it to go up in value.

c)

You sell the asset.

d)

All of these answer choices are correct.

60.

Which of the following refers to the cost of an asset?

a)

Basis of property

b)

Dividend

c)

Capital gain

d)

Capital loss

61.

If you hold an asset for more than 1 year and then sell it for a profit, you will be taxed at a rate of which of the following?

a)

Long-term capital gains.

b)

Short-term capital gains.

c)

Normal dividends.

d)

Capital assets.

62.

The rates on long-term gains are ______ short-term capital gain rates.

a)

higher than

b)

lower than

c)

the same as

d)

None of these answer choices are correct

63.

To increase your investment income, you should do which of the following?

a)

Buying assets that have the potential to go up in value.

b)

Holding assets over the long term.

c)

Letting the power of compounding generate unearned income.

d)

All of these answer choices are correct.

64.

Mia recently purchased 500 shares of a company for $20,000 ($40 per share). This year, she received a dividend of $2,000. Her shares are now worth $120. What is Helen’s per share basis in the company?

a)

$40.

b)

$80.

c)

$120.

d)

$500.

65.

When you inherit an asset because someone died, your basis becomes the fair market value as of the person’s death. This refers to which of the following?

a)

Long-term capital gain.

b)

Short-term capital gain.

c)

Stepped-up basis.

d)

Capital asset.

66.

Which of the following is an example of a government benefit?

a)

Earnings.

b)

Dividends.

c)

Medicaid.

d)

Commission.

67.

Which of the following refers to cash payments made to individuals who have recently lost their jobs due to no fault of their own?

a)

Unemployment benefits.

b)

Medicaid.

c)

Supplemental Nutrition Assistance Program (SNAP).

d)

Earnings.

68.

How long does unemployment benefits typically last?

a)

1 year.

b)

26 weeks or less.

c)

1 month.

d)

2 years.

69.

Which of the following is a health insurance program for low-income households?

a)

Temporary Assistance for Needy Families (TANF)

b)

Medicare

c)

Medicaid

d)

SNAP

70.

Which of the following provides supplemental income to very-low-income unemployed households who typically have children?

a)

TANF.

b)

Medicare.

c)

Medicaid.

d)

SNAP.

71.

Which of the following is a health insurance program for elderly individuals, ages 65 and older?

a)

TANF.

b)

Medicare.

c)

Medicaid.

d)

SNAP.

72.

Which of the following provides money to low-income households to purchase food?

a)

TANF.

b)

Medicare.

73.

Which of the following provides financial aid for low-income undergraduate students?

a)

TANF

b)

Federal Pell Grant

c)

Medicaid

d)

SNAP

74.

Which of the following provides a record of how much taxable income has been earned for each year of an individual’s working life?

a)

Earnings history.

b)

Federal Pell Grant.

c)

TANF.

d)

SNAP.

75.

Which of the following reduces the amount of tax someone must pay?

a)

Social security.

b)

Nonrefundable tax credit.

c)

Refundable tax credit.

d)

Unemployment benefits.

76.

Which of the following is a refundable tax credit?

a)

Earned Income Tax Credit.

b)

Child Tax Credit.

c)

American Opportunity Tax Credit.

d)

All of these answer choices are correct.

77.

Social Security benefits are based on which of the following?

a)

Earnings history.

b)

Unearned income.

c)

Marital status.

d)

Level of education.

78.

Which of the following is a benefit under the Social Security program?

a)

Retirement benefits.

b)

Disability benefits.

c)

Family benefits for children under the age of 18 if you die.

d)

All of these answer choices are correct.