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WorksheetsEconomics and Finance Quiz
Total questions: 62
Worksheet time: 5hrs 2mins
Why would a bank require a borrower to have collateral or a cosigner before agreeing to lend funds?
Discourages some borrowers from asking for a loan
Reduces risk associated with imperfect information
Both act like a service contract in the goods market
Complicates the process to discourage risking borrowers
Which best describes how a credit card works?
The credit card company extends you a line of credit. You then pay a small percentage of the cost of those purchases in one annual payment.
The credit card company extends you a line of credit. You purchase “stuff” and the purchase gets directly paid with funds in your checking account.
The credit card company extends you a line of credit. This is free money that you can use to purchase the “stuff” you need.
The credit card company extends you a line of credit. You purchase “stuff” and then have a choice to pay the balance in full or a minimum payment each month.
Specialization in production is important primarily because it accomplishes which of the following?
results in a greater output for society
allows society to inefficiently use its scarce resources
allows society to trade by barter
allows society to have fewer capital goods
Individually and collectively, we are forced to make decisions about how to best use our resources because of:
trade offs
scarcity
efficiency
rationality
In modern economies, credit cards are a ________________ because of their wide acceptance as a method of payment for both goods and services.
unit of exchange
store of value
unit of account
medium of exchange
Why is it more difficult to get out of debt when only paying the minimum amount?
Your entire minimum payment goes toward principal and the interest continues to compound.
The majority of your minimum payment is going toward interest and finance charges and only a small amount toward the principal.
Your credit limit always resets, so you have a lot of spending power each month.
You avoid paying any interest and fees.
What are some strategies to improve your personal credit score? Select two answers.
Pay bills late
Close all old credit accounts
Use a high percentage of your credit limit
Pay off credit card balances in full each month
Limit the number of credit applications you complete
How can charitable giving benefit you financially?
It always reduces your taxes
It guarantees a return on investment
It can provide tax deductions
It increases your credit score
A credit card has an interest rate of 18% annually. If the balance is $1,000 how much interest will accrue in one year if no payments are made?
$18
$180
$1,018
$1,180
How can you maintain a low-risk borrower status? Select two answers.
Maximize your credit card usage
Keep a high debt-to-income ratio
Make all loan payments on time
Frequently open new credit accounts
Have a stable income
Which action can help eliminate credit card debt?
Avoid making any payments
Only pay the minimum required
Consolidate debts into a lower-interest loan
Increase your credit limit
What are some benefits of maintaining a checking account? Select two answers.
It increases your credit score
It provides a place to keep money secure and accessible
It offers high interest rates
It eliminates the need for a budget
It allows you to set up direct deposit for your paycheck
What does it mean to have a low debt-to-income ratio?
You have a lot of debt compared to your income
You have little debt compared to your income
Your income is low
Your debt is high
What is the primary purpose of reconciling a bank statement?
To check for bank fees
To ensure all transactions are accurate
To apply for a loan
To increase your credit score
What is Collateral?
A. A type of credit card
B. Property or assets used as security for a loan
C. A financial penalty for late payments
D. A reward for timely payments
What is interest?
A hobby or something you like to do
Money that you pay to borrow money or earn for saving money
A new video game
A type of food
What happens if you don't pay back money you borrowed?
You get more money
Nothing happens
You might have to pay extra and it can hurt your credit
You get a reward
What does it mean to have good credit?
Having a lot of credit cards
Being able to borrow money or buy things and pay for them later because you have a history of paying back on time
Owning a big wallet
Having all the video games
What percentage of Americans use a credit or debit card for at least some of their purchases?
80-90%
50-69%
30-40%
10-20%
How can having a mix of credit accounts, such as a mortgage, car loan, and credit cards, affect your financial flexibility?
It limits the amount of credit you can access
It can improve your creditworthiness by showing you can manage different types of credit
It makes financial management more complex
It has no effect on financial flexibility
What is a common consequence of not managing credit properly?
Increased credit score
Lower interest rates on loans
Higher borrowing costs
More frequent loan approvals
Imagine you have a mortgage, a car loan, and a couple of credit cards. What role does this diversity of credit accounts play in your financial health?
It complicates financial management
It has no role or impact
It can demonstrate to lenders your ability to manage various types of credit responsibly
It reduces your credit score
How can consolidating your student loans help your budget?
You'll pay more in interest over time
You'll be more likely to be eligible for loan forgiveness
Your monthly payment may decrease
Your interest rate is guaranteed to decrease
What is the purpose of tracking your spending?
To identify areas where you can cut back
To calculate your net worth
To determine your income tax liability
To compare your spending to your budget
A person who agrees to pay off a loan if the original party does not pay
Collateral
Character
Character
Cosigner
What is the purpose of tracking your spending?
To identify areas where you can cut back
To calculate your net worth
To determine your income tax liability
To compare your spending to your budget
What is a bond in the context of business financing?
A type of equity that gives stock ownership
A certificate of debt issued to manage payroll
A method to secure physical assets
A form of debt financing where a business borrows money from investors and repays with interest
When a business decides to pay a loan off early due to a cash surplus, how is this business using financialinformation?
to manage debt
to increase sales
to create budgets
to make purchases
What is the purpose of tracking your spending?
To identify areas where you can cut back
To calculate your net worth
To determine your income tax liability
To compare your spending to your budget
Money that is paid for the use of money is called ___.
Principal
Liquidity
Risk
Interest
Why is it important to start investing as soon as possible?
You take less risk when you are young, so money will be safe
You have more time for your money to compound
Investing is an easy way to make quick money
Fees on investments are cheaper when you are younger
a number assigned to a person that indicates to lenders their capacity to repay a loan.
Credit score
Credit report
Credit history
Credit bureau
Paying my bills late could negatively affect my credit history.
True
False
Your credit score is not configured off of which of the following:
Payment history
Amount of money owed
Grades in School
Length of credit history
What is a credit report?
A detailed report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness
A detailed report of a bank's credit history prepared by a credit expert and used by consumers in determining a bank's creditworthiness
A report which shows which credit cards are better than others
A report invented by Allan Greenspan and credited to Al Gore
What is a credit score?
a number between 300 and 850 representing your creditworthiness
a statistical number that evaluates a consumer's creditworthiness and is based on credit history.
Often referred to as a FICO score
All of the above
What is debt?
Another word for death
Something, typically money, that is owed or due
A loan on which you do not have to pay interest
That which is incurred during childhood and consummated in college
