Share Personal Finance Final Exam Review
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When interest rates increase, how does that affect consumer spending?
Consumer spending stays the same
People borrow and spend more money
People increase their savings and reduce spending
Has no effect on consumer behavior
Which budgeting method allocates income into specific categories like needs, wants, and savings?
line-item budgeting
envelope system
50/30/20 rule
zero-based budgeting
What is a primary benefit of maintaining a good credit score?
Unlimited credit card rewards
Free credit monitoring services
Lower interest rates when borrowing money
Guaranteed approval for all loans
When creating a budget, what should be prioritized first?
Essential living expenses
Luxury items
Investment opportunities
Entertainment expenses
What is a common warning sign of identity theft?
Annual credit reports
Monthly utility bills
Unexplained withdrawals from bank accounts
Receiving regular credit card sttements
How do higher interest rates affect the housing market?
Accelerates home construction
Lowers monthly mortgage payments
Increases home affordibility
Reduces the number of qualified buyers
What is a key advantage of using a credit card for purchases?
Guaranteed fraud protection
Unlimited spending power
No interest charges
Building credit history
Which budgeting practice helps prevent overspending?
Tracking all expenses
Having multiple credit cards
Avoiding budget planning
Using only cash for purchases
How does life insurance protect against financial loss?
It provides retirement income
It covers medical expenses
It pays for property damage
It provides income replacement for beneficiaries
How can consumers best protect against identity theft online?
Clicking on email attachments
Using public Wi-Fi networks
Sharing passwords with trusted friends
Using strong, unique passwords
What effect does a lower credit score typically have on loan applications?
Better loan terms
Lower down payment requirements
Faster approval process
Higher interest rates
Which factor most directly affects the interest rate offered on a personal loan?
Employment history
Education level
Age of applicant
Credit score
What is a primary purpose of creating an emergency fund?
Avoiding unexpected financial stress
Earning high interest returns
Maximizing tax deductions
Building retirement savings
Which insurance feature represents the amount you must pay before coverage begins?
Copayment
Benefit limit
Deductible
Premium
What action should you take if you discover unauthorized charges on your credit card?
Wait for the next statement
Contact the credit card issuer immediately
Close all credit accounts
Pay the charges and dispute later
How does compound interest benefit savers?
Eliminates investment risk
Generates interest on previouly earned interest
Provides guaranteed returns
Reduces tax liability
