Personal Finance, 12th Edition by Melissa Hart Jack R.
Kapoor, Les R. Dlabay, Robert J. Hughes
Chapter 01 Testbank - Static
Student: ___________________________________________________________________________
1. Increased demand for a product or service will usually result in lower prices
for the item. True False
2. Inflation reduces the buying power of the dollar. True False
3. Lenders benefit more than borrowers in times of high inflation. True
False
4. Economics is the study of using money to achieve financial goals. True
False
5. A decrease in the demand for a product or service may result in
unemployment from staff reduction. True False
6. Developing and using a budget is part of the "obtaining" component of
financial planning. True False
7. A financial plan is another name for a budget. True False
8. Planning to buy a car is an example of an intangible goal. True False
9. Opportunity costs refer to what a person gives up when making a choice.
True False
10. Personal opportunity costs refer to time, effort, and health that are given up
when a decision is made. True False
,11. Time value of money refers to changes in consumer spending when
inflation occurs. True False
12. Interest on savings is calculated by multiplying the principal amount times
the opportunity cost times the annual interest rate. True False
13. Present value is also referred to as compounding. True False
14. Opportunity costs may be viewed only in terms of financial resources. True
False
15. Gross Domestic Product (GDP) measures the total value of goods and
services produced within a country's borders, excluding items produced with
foreign resources. True False
16. Trade balance is defined as the difference between a country's exports and
its imports. True False
17. The main goal of personal financial planning is managing your money to:
A. save and invest for future needs.
B. reduce a person's tax liability.
C. achieve personal economic satisfaction.
D. spend to achieve financial objectives.
E. save, spend, and borrow based on current needs.
18. Higher prices are likely to result from: A.
lower demand by consumers.
B. increased production by business.
C. lower interest rates.
D. increased demand by consumers without increased supply.
E. an increase in the supply of a product.
19. Who is most likely to benefit from inflation?
A. Retired people
B. Lenders
C. Borrowers
D. Low-income consumers
E. Government
,20. Higher consumer prices are likely to be accompanied by: A.
lower union wages.
B. lower interest rates.
C. lower production costs.
D. higher interest rates.
E. higher exports.
21. With an inflation rate of 9 percent, prices would double in about ___________ years.
A. 4
B. 6
C. 8
D. 10
E. 12
22. Increased consumer spending will usually cause: A.
lower consumer prices.
B. reduced employment levels.
C. lower tax revenues.
D. lower interest rates.
E. higher employment levels.
23. Higher interest rates can be caused by: A.
a lower money supply.
B. an increase in the money supply.
C. a decrease in consumer borrowing.
D. lower government spending.
E. increased saving and investing by consumers.
24. The risk premium you receive as a saver is based: A.
on your credit rating.
B. on the amount of money you are borrowing.
C. only on the uncertainty associated with getting your money back.
D. only on the expected rate of inflation.
E. in part on the uncertainty associated with getting your money back and the expected rate of inflation.
25. Which of the following would increase the risk of a loan to the lender?
A. Inflation rate greater than loan rate
B. A short time to maturity
C. Consumer Price Index
D. Rule of 72
E. Inflation rate lower than loan rate
, 26. The stages in the family and financial needs of an adult are called the: A.
financial planning process.
B. budgeting procedure.
C. personal economic cycle.
D. adult life cycle.
E. tax planning process.
27. The study of how wealth is created and distributed is: A.
financial planning.
B. opportunity cost.
C. inflation.
D. economics.
E. a market economy.
28. The main economic influence that causes inflation is: A.
Changes in the stock market.
B. Decreases in interest rates.
C. Increases in employment.
D. Decreases in government spending.
E. Increases in demand without increases in supply.
29. The Fed refers to:
A. government regulation of business.
B. Congress.
C. the Federal Reserve System.
D. the Federal Deposit Insurance Corporation.
E. spending by the federal government.
30. The main responsibility of The Fed is to: A.
maintain an adequate supply of money.
B. approve spending by Congress.
C. set federal income tax rates.
D. determine illegal business activities.
E. maintain a balanced budget for the federal government.
31. Some savings and investment choices have the potential for higher earnings. However, these may also be difficult to
convert to cash when you need the funds. This problem refers to: A. inflation risk.
B. interest rate risk.
C. income risk.
D. personal risk.
E. liquidity risk.
32. Which of the following would cause consumer prices to drop?
A. Increased consumer borrowing
B. Higher spending by consumers
Kapoor, Les R. Dlabay, Robert J. Hughes
Chapter 01 Testbank - Static
Student: ___________________________________________________________________________
1. Increased demand for a product or service will usually result in lower prices
for the item. True False
2. Inflation reduces the buying power of the dollar. True False
3. Lenders benefit more than borrowers in times of high inflation. True
False
4. Economics is the study of using money to achieve financial goals. True
False
5. A decrease in the demand for a product or service may result in
unemployment from staff reduction. True False
6. Developing and using a budget is part of the "obtaining" component of
financial planning. True False
7. A financial plan is another name for a budget. True False
8. Planning to buy a car is an example of an intangible goal. True False
9. Opportunity costs refer to what a person gives up when making a choice.
True False
10. Personal opportunity costs refer to time, effort, and health that are given up
when a decision is made. True False
,11. Time value of money refers to changes in consumer spending when
inflation occurs. True False
12. Interest on savings is calculated by multiplying the principal amount times
the opportunity cost times the annual interest rate. True False
13. Present value is also referred to as compounding. True False
14. Opportunity costs may be viewed only in terms of financial resources. True
False
15. Gross Domestic Product (GDP) measures the total value of goods and
services produced within a country's borders, excluding items produced with
foreign resources. True False
16. Trade balance is defined as the difference between a country's exports and
its imports. True False
17. The main goal of personal financial planning is managing your money to:
A. save and invest for future needs.
B. reduce a person's tax liability.
C. achieve personal economic satisfaction.
D. spend to achieve financial objectives.
E. save, spend, and borrow based on current needs.
18. Higher prices are likely to result from: A.
lower demand by consumers.
B. increased production by business.
C. lower interest rates.
D. increased demand by consumers without increased supply.
E. an increase in the supply of a product.
19. Who is most likely to benefit from inflation?
A. Retired people
B. Lenders
C. Borrowers
D. Low-income consumers
E. Government
,20. Higher consumer prices are likely to be accompanied by: A.
lower union wages.
B. lower interest rates.
C. lower production costs.
D. higher interest rates.
E. higher exports.
21. With an inflation rate of 9 percent, prices would double in about ___________ years.
A. 4
B. 6
C. 8
D. 10
E. 12
22. Increased consumer spending will usually cause: A.
lower consumer prices.
B. reduced employment levels.
C. lower tax revenues.
D. lower interest rates.
E. higher employment levels.
23. Higher interest rates can be caused by: A.
a lower money supply.
B. an increase in the money supply.
C. a decrease in consumer borrowing.
D. lower government spending.
E. increased saving and investing by consumers.
24. The risk premium you receive as a saver is based: A.
on your credit rating.
B. on the amount of money you are borrowing.
C. only on the uncertainty associated with getting your money back.
D. only on the expected rate of inflation.
E. in part on the uncertainty associated with getting your money back and the expected rate of inflation.
25. Which of the following would increase the risk of a loan to the lender?
A. Inflation rate greater than loan rate
B. A short time to maturity
C. Consumer Price Index
D. Rule of 72
E. Inflation rate lower than loan rate
, 26. The stages in the family and financial needs of an adult are called the: A.
financial planning process.
B. budgeting procedure.
C. personal economic cycle.
D. adult life cycle.
E. tax planning process.
27. The study of how wealth is created and distributed is: A.
financial planning.
B. opportunity cost.
C. inflation.
D. economics.
E. a market economy.
28. The main economic influence that causes inflation is: A.
Changes in the stock market.
B. Decreases in interest rates.
C. Increases in employment.
D. Decreases in government spending.
E. Increases in demand without increases in supply.
29. The Fed refers to:
A. government regulation of business.
B. Congress.
C. the Federal Reserve System.
D. the Federal Deposit Insurance Corporation.
E. spending by the federal government.
30. The main responsibility of The Fed is to: A.
maintain an adequate supply of money.
B. approve spending by Congress.
C. set federal income tax rates.
D. determine illegal business activities.
E. maintain a balanced budget for the federal government.
31. Some savings and investment choices have the potential for higher earnings. However, these may also be difficult to
convert to cash when you need the funds. This problem refers to: A. inflation risk.
B. interest rate risk.
C. income risk.
D. personal risk.
E. liquidity risk.
32. Which of the following would cause consumer prices to drop?
A. Increased consumer borrowing
B. Higher spending by consumers
