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Foundations in Personal Finance - Chapter 1 Test
Name___________________________________
Date _______________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1) Which of the following best explains why students should learn about personal finance?
A) Learning to manage money at this stage can eliminate financial mistakes and promote huge
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financial benefits for the future.
Personal finance skills are better learned through trial and error.
B)
C) Personal finance skills are highly complex and require a great deal of time to learn.
D) Learning to manage money will help you achieve a profitable career.
2) Key components of financial planning include all of the following except:
A) Write out a detailed plan for accomplishing your goals
B) Replace money myths with money truths
C) Allow your financial planner to make all of your major money decisions
D) Regularly monitor and reassess your financial plan
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3) Which of the following statements best describes how Americans are being outsmarted by banks
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and other lenders?
A) Credit is marketed so well that we desire to have it while completely dismissing the fact
that interest rates and fees continue to destroy our financial well-being.
B) We are taught that we can buy happiness.
C) Buying things on credit has become acceptable in our culture.
D) We are driven by consumerism.
4) Personal financial success is primarily the result of:
A) Managing your money behavior
B) Winning the lottery
C) Generous welfare and unemployment programs
D) Inheriting money from your parents
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5) Which of the following statements best explains why income alone does not determine wealth?
A) Investing is the only factor that contributes to wealth building.
B) Income alone does determine a personʹs wealth.
C) Only people who are natural savers can become wealthy.
D) How much money a person makes does not dictate his or her spending and saving
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behavior.
6) Which of the following is a consequence of spending more than you make?
A) Missed opportunity to save and invest
B) Stress
A cycle of debt
C)
D) All of the above
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6)
7) Which of the following is not a true statement?
A) Americans learned to borrow amidst post-WWII prosperity.
B) The credit industry in America has not changed much since 1917.
C) After 1970, consumer debt skyrocketed.
D) As banks made higher profits, they were willing to lend more money to consumers.
7)
8) When it comes to managing money, success is about ________% knowledge and ________%
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behavior.
A) 50, 50
B) 60, 40
C) 80, 20
D) 20, 80
9) The widespread financial insecurity of Americans is primarily because:
A) The incomes of Americans are low
B) The saving rate of Americans is low and many borrow in order to spend more than they
C)
D)
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earn
Government programs are unavailable to help people when they are disabled or experience
unemployment
Most Americans save a high proportion of their income
10) Which of the following is not a factor in becoming money smart?
A) Have knowledge of basic math
B) Learn the language of money
C) Manage your behavior with money
D) Learn how to read your credit card statements
10)
11) Which of the following is not a benefit of understanding your own money personality?
A) Recognizing who you are allows you the opportunity to grow and learn.
B) Once you know your money personality, you can develop a financial plan that works for
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you.
C) Knowing your money personality allows you to excuse excessive spending because it is
D)
simply part of your nature.
None of the above.
12) Why was the use of credit uncommon prior to 1917?
A) Laws prevented lenders from charging high interest rates.
B) Borrowing money was generally not socially acceptable.
C) Lending money to others was not profitable.
D) All of the above.
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13) When it comes to personal finance, the math is easy. Whatʹs challenging is managing your
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________.
A) Income
B) Friends
C) Bank account
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D) Behavior
14) Which of the following is not a reason credit is marketed heavily to consumers in the United
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States?
A) The credit industry has become extremely profitable.
B) There is strong consumer demand for big-ticket items.
C) Since 1920, credit laws in the United States have been relaxed in an attempt to create a
D)
mainstream alternative to loan sharks for the working class.
The use of credit is not socially accepted in the United States.
15) During the Great Depression, New Deal policymakers came up with mortgage (home loans) and
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consumer lending policies that convinced commercial banks that:
A) Consumers would not be willing to use credit, since borrowing money for large purchases
had not previously been an option for the middle class
B) They would not be able to compete with loan sharks in the industry of consumer lending
C) Consumer credit could be profitable
D) Consumer credit was not a profitable industry
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
16) True financial security is achieved when your money begins to generate an income -your money
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starts working for you.
17) Since you are a teenager, what you do now with money will have little effect on your financial
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future.
18) Most Americans today are wealthy and will have financial security when they retire.
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19) Most Americans avoid the use of credit when it comes to buying big -ticket items like a car or
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furniture for their home.
20) Learning the language of money is not that important because you will be able to depend on
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financial planners to manage your money.
21) Having debt keeps you from building wealth.
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22) The credit system today is structured to accommodate a state of uncertain employment and
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income instability, utilizing high interest rates and fees to turn huge profits.
23) Expensive houses and new cars are a true indication of wealth.
23)
24) When developing a personal financial plan, one of the first things you should do is assess your
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current financial situation. This includes your income, assets and liabilities.
25) Everyone should have the same financial plan. A budget that works for one person should be
sufficient for everyone.
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25)
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the
question.
26) Explain why understanding your money personality is important when it comes to
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developing a money plan thatʹs right for you.
27) Review the Chapter 1, Section 2 segment titled, ʺWhatʹs Your Money Personality?ʺ Which
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of the four student responses most matches your view of money?
28) Review the sidebar content in Chapter 1, Section 2 titled, ʺTeen money attitudes shifted
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with the recent recession.ʺ Write a paragraph summarizing the ways in which teen
attitudes toward money, work and family changed during the recent recession.
29) Explain how marketing can affect your decisions when it comes to spending money.
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30) Describe some of the mistakes Americans often make when it comes to money.
30)
31) Does managing your money well mean that you canʹt have fun with your money?
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Explain your answer.
32) Does the ʺhistory of credit and consumerismʺ segment make you view the use of credit
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differently than you did before? Explain your answer.
VOCABULARY. Define each term or phrase in the space provided or on a separate sheet of paper.
Select the word that is described in the statement.
33) A person or business that offers loans at extremely high interest rates (loan shark, creditor)
34) A person or organization that uses a product or service (borrower, consumer)
35) An obligation of repayment owed by one party to a second party (debt, ownership)
36) The granting of a loan and the creation of debt; any form of deferred payment (credit, annual fee)
37) The knowledge and skillset necessary to be an informed consumer and manage finances effectively (financial
literacy, budgeting)
38) A fee paid by a borrower to the lender for the use of borrowed money.(bills, interest)
39) A system by which goods and services are produced and distributed (assets, economy)
40) A debt evidenced by a ʺnote,ʺ which specifies the principal amount, interest rate and date of repayment (bank
fee, loan)
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41) A period of temporary economic decline during which trade and industrial activity are reduced; generally
identified by a fall in gross domestic product (GDP) (market economy, recession)
42) All of the decisions and activities of an individual or family regarding their money, including spending,
saving, budgeting, etc. (personal finance, currency)
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