WISE Financial Literacy Certification Test Practice Study Guide.

WISE Financial Literacy Certification Test Practice Study Guide. Sources of Income - answerWages, rentals, interest, capital, profit, investments, entrepreneurship Exemption (allowance) and how it works - answerAllowance is used to reduce amount of taxed income Liquidity - answerThe degree of ease in which the assets can be sold Gift cards and how they work (a monthly inactivity fee may begin after 12 months) - answerclosed loop system and open loop system Discretionary income or budget surplus - answerNot allocated for food or shelter Money orders (high rate of counterfeits) - answerA payment order for a pre-specified amount of money and is purchased at different types of stores--it is used like a check. They are usually limited in maximum face value to some specific figure. Example. The United States Postal Service limits domestic postal money orders to U.S. $1,000.00. U.S. Postal money orders are hard to counterfeit Why does the U.S. currency have value even though it is not tied to a commodity - answerThere is a belief that money has value and there fore is accepted Opportunity cost - answerNext best alternative--it is what is given up when a choice is made Who is hurt the most and the least with inflation - answerCreditors, people living on fixed income, and people trying to save are hurt the most. People who owe a significant debt are benefitted Role of the Treasury Department - answerCollects taxes, prints money, issues treasury bonds Pay yourself first - answerAutomatically route money from paycheck to savings (before paying bills) CD: What is it and what happens if you cash it before maturity - answerIt is a time deposit offered at financial institutions--penalty if cashed before maturity Institutions that give loans - answerBanks,