Wise Financial Literacy Certification Test Topic Check List Graded A+

1 Wise Financial Literacy Certification Test Topic Check List Graded A+ What are the different ways people can earn income? ✔✔Income can come from wages, rental properties, interest, investments, business profits, and entrepreneurial activities. How does an exemption (also known as an allowance) function in taxation? ✔✔An exemption reduces the portion of your income that is subject to taxes. What is liquidity, and what are examples of liquid assets? ✔✔Liquidity refers to how easily assets can be sold or converted to cash. Examples of li quid assets include cash and marketable securities. How do gift cards work and what are their fee structures? ✔✔Gift cards can operate under a closed loop system (usable only at specific stores) or an open loop system (usable at various locations). Inactivity fees might apply after 12 months of no use. What is discretionary income or a budget surplus? 2 ✔✔Discretionary income is the amount available for spending on non -essential items after covering necessities like food and housing. How do m oney orders work and what are their limitations? ✔✔A money order is a pre -paid payment instrument purchased from various retailers, functioning similarly to a check. They often have a maximum limit (e.g., U.S. Postal Service money orders are capped at $1,000 domestically). Money orders are generally harder to counterfeit. Why does U.S. currency hold value even without being linked to a physical commodity? ✔✔The value of U.S. currency is based on public trust and acceptance, not tied to physical commodities. What is opportunity cost? ✔✔Opportunity cost represents the value of the best alternative that is foregone when making a choice. Who is most and least affected by inflation? 3 ✔✔Lenders (such as banks) and individuals with fixed incomes are most affected by inflation. Those who have substantial debts are least impacted. What are the responsibilities of the Treasury Department? ✔✔The Treasury Department manages tax collect ion, prints currency, and issues government bonds. What does "Pay Yourself First" mean in financial management? ✔✔It means setting aside a portion of your paycheck for savings or retirement before spending on other expenses. What is a Certificate of Deposit (CD) and what are the consequences of early withdrawal? ✔✔A CD is a time -bound deposit account offered by financial institutions. If you withdraw funds before the CD matures, you may incur penalties. Which types of institutions provide l oans? ✔✔Loans can be obtained from banks, credit unions, pawnshops, finance companies, payday lenders, and tax preparers.