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WISE FINANCIAL LITERACY
CERTIFICATION TEST QUESTIONS WITH
DETAILED VERIFIED ANSWERS
Earned Income Ans: Income derived from active participation
in a trade or business, including wages, salary, tips,
commissions and bonuses.
Unearned Income Ans: Any income that comes from investments and
other sources unrelated to employment services. Examples: interest from
a savings account, bond interest, alimony, and dividends from stock
Exemptions (aka allowance) and how they work Ans: If you are not
claimed as a dependent on another
taxpayer's return, then you can claim one personal tax
exemption. The exemption reduces your taxable income just like a
deduction does, but has fewer restrictions to claiming it. If you are
married and file a joint tax return, both you and your spouse each get an
exemption.
Exemptions (aka allowance) and how they work PART 2 Ans: The IRS
allows you to take additional exemptions for each dependent you claim.
Frequently, the source of these exemptions are the children who live with
you for more than half the year, are under 19 years old (or under 24 if a
full-time student) and who don't provide more than half of their own
financial support during the tax year.
Liquidity - what does it mean? Ans: The ability to convert an asset to
cash quickly and with
minimal impact to the price.
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Liquidity - what financial products are liquid? Ans: Examples: Cash, Most
stocks, money market instruments and government bonds.
Gift cards - how do they work? Ans: A gift card is a restricted monetary
equivalent is issued by retailers or banks to be used as an alternative to a
non-monetary gift.
Gift cards - how do they work - fees? Ans: Prepaid cards, gift cards, and
gift certificates cannot expire within five years of activation or unless the
terms of the expiration are clearly disclosed. The law bans dormancy
fees, inactivity fees or service fees on gift cards unless there has been no
activity in a 12-month period and the issuer clearly discloses all fees
before the gift card is purchased.
Gift cards - how do they work - fees? (Exclusions) Ans: Prepaid phone
cards , re-loadable cards, loyalty
or rewards cards, cards issued for admission to special
events or venues and certificates issued in paper form only are exempt.
Discretionary income and budget surplus Ans: The amount of an
individual's income that is left for
spending, investing or saving after taxes and personal
necessities (such as food, shelter, and clothing) have been paid.
Discretionary income includes money spent on luxury items, vacations
and non-essential goods and services.
Money orders - high rate of counterfeits Ans: A certificate that allows
the stated payee to receive cash
on-demand, usually issued by governments and banking institutions. A
money order functions much like a check, in that the person who
purchased the money order may stop payment.
Why does the US currency have value? Ans: Its value is only based on
what we can get in exchange for it. Or put it another way, money has
value as long as other people believe the money you give them can be
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exchanged for the goods and services they desire in the
future.
Opportunity cost Ans: The second-best alternative (or the value of that
alternative) that must be given up when scarce resources are used for
one purpose instead of another
Who is hurt the most and least with inflation Ans: Inflation is a general
increase in prices and a corresponding decrease in money's purchasing
power.
Who is hurt the most with inflation? Ans: Those on fixed incomes
(retired people)
Who is hurt the least with inflation? Ans: Borrowers and producers
Role of the treasury department Ans: The United States Department of
the Treasury is the
government (Cabinet) department responsible for issuing all Treasury
bonds, notes and bills.
Role of the treasury department Ans: The U.S. Treasury is responsible
for the revenue of the U.S.
government, but here are some other key functions:
- Printing of bills, postage, Federal Reserve notes, and
minting of coins
- Collection of taxes and enforcement of tax laws (through
the IRS)
- Management of all government accounts and debt issues
- Overseeing U.S. banks
WISE FINANCIAL LITERACY
CERTIFICATION TEST QUESTIONS WITH
DETAILED VERIFIED ANSWERS
Earned Income Ans: Income derived from active participation
in a trade or business, including wages, salary, tips,
commissions and bonuses.
Unearned Income Ans: Any income that comes from investments and
other sources unrelated to employment services. Examples: interest from
a savings account, bond interest, alimony, and dividends from stock
Exemptions (aka allowance) and how they work Ans: If you are not
claimed as a dependent on another
taxpayer's return, then you can claim one personal tax
exemption. The exemption reduces your taxable income just like a
deduction does, but has fewer restrictions to claiming it. If you are
married and file a joint tax return, both you and your spouse each get an
exemption.
Exemptions (aka allowance) and how they work PART 2 Ans: The IRS
allows you to take additional exemptions for each dependent you claim.
Frequently, the source of these exemptions are the children who live with
you for more than half the year, are under 19 years old (or under 24 if a
full-time student) and who don't provide more than half of their own
financial support during the tax year.
Liquidity - what does it mean? Ans: The ability to convert an asset to
cash quickly and with
minimal impact to the price.
, Page | 2
Liquidity - what financial products are liquid? Ans: Examples: Cash, Most
stocks, money market instruments and government bonds.
Gift cards - how do they work? Ans: A gift card is a restricted monetary
equivalent is issued by retailers or banks to be used as an alternative to a
non-monetary gift.
Gift cards - how do they work - fees? Ans: Prepaid cards, gift cards, and
gift certificates cannot expire within five years of activation or unless the
terms of the expiration are clearly disclosed. The law bans dormancy
fees, inactivity fees or service fees on gift cards unless there has been no
activity in a 12-month period and the issuer clearly discloses all fees
before the gift card is purchased.
Gift cards - how do they work - fees? (Exclusions) Ans: Prepaid phone
cards , re-loadable cards, loyalty
or rewards cards, cards issued for admission to special
events or venues and certificates issued in paper form only are exempt.
Discretionary income and budget surplus Ans: The amount of an
individual's income that is left for
spending, investing or saving after taxes and personal
necessities (such as food, shelter, and clothing) have been paid.
Discretionary income includes money spent on luxury items, vacations
and non-essential goods and services.
Money orders - high rate of counterfeits Ans: A certificate that allows
the stated payee to receive cash
on-demand, usually issued by governments and banking institutions. A
money order functions much like a check, in that the person who
purchased the money order may stop payment.
Why does the US currency have value? Ans: Its value is only based on
what we can get in exchange for it. Or put it another way, money has
value as long as other people believe the money you give them can be
, Page | 3
exchanged for the goods and services they desire in the
future.
Opportunity cost Ans: The second-best alternative (or the value of that
alternative) that must be given up when scarce resources are used for
one purpose instead of another
Who is hurt the most and least with inflation Ans: Inflation is a general
increase in prices and a corresponding decrease in money's purchasing
power.
Who is hurt the most with inflation? Ans: Those on fixed incomes
(retired people)
Who is hurt the least with inflation? Ans: Borrowers and producers
Role of the treasury department Ans: The United States Department of
the Treasury is the
government (Cabinet) department responsible for issuing all Treasury
bonds, notes and bills.
Role of the treasury department Ans: The U.S. Treasury is responsible
for the revenue of the U.S.
government, but here are some other key functions:
- Printing of bills, postage, Federal Reserve notes, and
minting of coins
- Collection of taxes and enforcement of tax laws (through
the IRS)
- Management of all government accounts and debt issues
- Overseeing U.S. banks
