Personal Finance , 14th Edition E. Thomas Garman TEST BANK | Full Chapters

Test Bank

,Name: Class: Date:

Chapter 01: Understand Personal Finance
True / False

1. Financial literacy is knowledge of facts, concepts, principles, and technological tools that are fundamental to being
smart about money.
a. True
b. False
ANSWER: True

2. Being financially responsible is being knowledgeable about facts, concepts, principles, and technological tools that are
fundamental to being smart about money.
a. True
b. False
ANSWER: False

3. Personal finance involves how people spend, save, protect, and invest their financial resources.
a. True
b. False
ANSWER: True

4. Financial success is defined as having high wealth.
a. True
b. False
ANSWER: False

5. Financial security is defined as having a high income.
a. True
b. False
ANSWER: False

6. People who save and invest are much more likely to have funds for future consumption.
a. True
b. False
ANSWER: True

7. Standard of living refers to an individual's level of spending and consumption.
a. True
b. False
ANSWER: False

8. Standard of living is what individuals or groups aspire to attain, and level of living is the level of wealth, comfort,
materials goods, and necessities one is currently living with.
a. True
b. False
ANSWER: True

9.Financialsecurityorwealthrequiresyoutospendlessthanyouearn.
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,Name: Class: Date:

Chapter 01: Understand Personal Finance

a. True
b. False
ANSWER: True

10. A business cycle is a wavelike pattern of economic activity that includes an expansion, peak, contraction, and trough.
a. True
b. False
ANSWER: True

11. The expansion phase is the preferred stage of the economic cycle.
a. True
b. False
ANSWER: True

12. Since it is impossible to make precise forecasts about economic trends, we can ignore inflation and interest rates when
planning our finances.
a. True
b. False
ANSWER: False

13. The typical U.S. recession is marked by an average economic decline of 2 percent.
a. True
b. False
ANSWER: True

14. The gross domestic product broadly measures the nation’s economic health.
a. True
b. False
ANSWER: True

15. Procyclical economic indicators move in the same direction as the economy.
a. True
b. False
ANSWER: True

16. The index of leading economic indicators is a composite index reported monthly that suggests the future direction of
the U.S. economy.
a. True
b. False
ANSWER: True

17. The index of leading economic indicators averages eight components of growth from various segments of the
economy.
​
a. True

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, Name: Class: Date:

Chapter 01: Understand Personal Finance

b. False ANSWER: False

18. Leading economic indicators are relied upon to measure the state of the economy at any point in time.
a. True
b. False ANSWER: False

19. An example of inflation is an increase in the price of coffee, gasoline, or other commodities.
a. True
b. False
ANSWER: True

20. A steady rise in the general level of prices is called inflation.
a. True
b. False
ANSWER: True

21. Deflation is a period of declining prices.
a. True
b. False
ANSWER: True

22. Deflation occurs in an economy when there is an expansion in the money supply.
a. True
b. False ANSWER: False

23. The amount of goods and services that one's income will buy is called purchasing power.
a. True
b. False
ANSWER: True

24. Retirees or others on fixed incomes suffer during times of moderate to high inflation.
a. True
b. False
ANSWER: True

25.NOMINALINCOMEisadjustedforinflationandthusreflectstheactualpurchasingpowerofone'sincome.
a. True
b. False ANSWER: False

26. In times of high inflation, personal incomes generally keep up with the inflation rate
. a. True




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