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