WISE Financial Literacy Certification Term Review with Complete Solutions

1 WISE Financial Literacy Certification Term Review with Complete Solutions What does an exemption refer to in terms of taxation? ✔✔It is a legal deduction that lowers the amount of income subject to tax. What is a gift card and how does it function? ✔✔A gift card is a prepaid card with a fixed amount of credit that can be used for purchases at a designated store. What does discretionary income or a budget surplus represent? ✔✔It is t he portion of income available for spending after taxes have been paid. What is a money order and how is it used? ✔✔A money order is a payment method that can be exchanged for cash and functions similarly to a check. It is commonly purchased by indi viduals without a bank account. Why does U.S. currency hold value? 2 ✔✔Its value is upheld because the government has officially recognized it as valid for settling debts. What is the concept of opportunity cost? ✔✔Opportunity cost is the value of the best alternative option that is forgone when making a decision. Who benefits and who suffers from inflation? ✔✔Companies and borrowers typically benefit from inflation, while workers, those with fixed incomes, and savers usually experience negative effects. What role does the U.S. Treasury Department play? ✔✔It oversees government revenue management and is responsible for issuing bonds, notes, and bills. What does "pay yourself first" mean in financial planning? ✔✔It involves allocating money to savings and retirement accounts before spending on other expenses.