Personal Financial Literacy 2nd Edition By Joan Ryan – Test Bank

 

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Sample Test

Chapter 03

 

TRUE/FALSE

 

Indicate whether the statement is true or false by writing T for True or F for False on the answer sheet.

 

1.   Changing prices affect the spending power of both producers and consumers.

 

2.   Businesses base price decisions, in part, on the spending patterns of consumers.

 

3.   Reflation occurs when prices are rising at a slow rate.

 

4.   As inflation rises, the true buying power of each dollar falls; this means an individual’s standard of living will drop.

 

5.   Cost-push inflation occurs when cost increases are not offset with higher productivity that lowers the cost of each unit made.

 

6.   The U.S. government measures inflation using tools such as the Consumer Price Index.

 

7.   Monetary policy refers to actions by the federal government in setting wage rates.

 

8.   In a market economy, if a price is set too low, consumers may think the product has a low value and not buy it.

 

9.   Value-based pricing involves setting prices for products based on the competitors’ prices.

 

10.                Emotional and impulse buying often lead to buyer’s remorse, meaning you later realize you made a poor choice.

 

11.                Economizing and optimizing are consumer buying strategies that people use at different times.

 

12.                Taking the time to research purchases does not lead to better buying decisions.

 

13.                Advertising is a method used by businesses to create demand for products.

 

14.                The Internet is not a good place to reach a large audience when selling products.

 

15.                Door-to-door sales are a form of indirect advertising used to grab consumers’ attention.

 

16.                Preparing a shopping list will help consumers avoid impulse buying.

 

17.                Consumers are allowed to copy the contents of a CD to a portable or other device for personal purposes.

 

18.                The FDA approves drugs before they can be sold to the public.

 

19.                Generic drugs are similar to brand-name drugs, but they are often less effective.

 

20.                Liquidation prices are always lower than sale prices.

 

 

MULTIPLE CHOICE

 

Write the letter of the choice that best completes the statement or answers the question on the answer sheet.

 

21.                The Federal Reserve System

22.                is known as the Fed

23.                is the central bank in the United States

24.                was created by Congress

25.                all of the above

 

22.                Which type of inflation occurs when prices are high, then drop due to decreased demand, and then are restored to a previous high level?

23.                disinflation

24.                hyperinflation

25.                inflation

26.                reflation

 

23.                Retail websites

24.                typically provide full descriptions of products, including pictures

25.                allow buyers to shop online during limited, set hours

26.                may use cookies to track the web pages that a user visits

27.                both a and c

 

24.                As general price levels rise, the value of money

25.                falls

26.                rises

27.                stays the same

28.                is not affected

 

25.                As resources become scarce or more difficult to get, prices rise in the form of

26.                demand-pull inflation

27.                cost-push inflation

28.                real-cost inflation

29.                all of the above

 

26.                The rate that banks charge their most creditworthy business customers is called the

27.                discount rate

28.                prime rate

29.                federal funds rate

30.                reserve rate

 

27.                The cost of making and delivering Product A is $50.00. The company marks up this amount by 40 percent to set the price. What is the price of the product?

28.                $70.00

29.                $75.25

30.                $90.00

31.                $62.35

 

 

28.                The method of setting a price so that it will be competitive with similar products currently being sold is called

29.                cost-plus pricing

30.                value-based pricing

31.                market-based pricing

32.                all of the above

 

29.                The buying strategy by which consumers save as much as possible and spend only when necessary is called

30.                optimizing

31.                economizing

32.                stockpiling

33.                hoarding

 

30.                Consumers should be careful not to let optimizing lead to

31.                excessive saving

32.                good buying habits

33.                stocking too few of needed items

34.                overspending

 

31.                Which selling strategy is illustrated by having a store location that is easy for customers to visit?

32.                customer service

33.                convenience

34.                meeting specific product needs

35.                all of the above

 

32.                An example of a product that meets emotional rather than basic needs is

33.                food

34.                makeup

35.                clothing

36.                electricity

 

33.                Which form of Internet advertising is used to grab the reader’s attention while the reader is visiting a website?

34.                cookies

35.                banner ads

36.                spam

37.                newsletters

 

34.                Which of the following strategies is effective for consumers to use while they are shopping?

35.                prepare a shopping list

36.                decide how much you are going to spend

37.                evaluate your purchase

38.                stick to your shopping list

 

 

35.                Which of the following government agencies enforces laws and prevents the selling of mislabeled foods, drugs, and cosmetics?

36.                FDA

37.                FTC

38.                SEC

39.                USDA

 

36.                Which of the following acts protects your health and billing information by limiting access to it?

37.                FERPA

38.                Cooperative Extension

39.                HIPPA

40.                MACAP

 

37.                Which of the following schemes involves advertising a basic service at a low price to lure in customers and then selling them additional repairs or services?

38.                bait and switch

39.                fake sale

40.                low-balling

41.                pyramid scheme

 

38.                Which of the following guarantees the quality and performance of a product or service?

39.                unit pricing

40.                warranty

41.                liquidation

42.                target pricing

 

39.                Which of the following types of inflation involves rapidly rising prices that cause consumers to spend their money as fast as they can to avoid even higher prices?

40.                hyperinflation

41.                reflation

42.                disinflation

43.                demand-pull inflation

 

40.                When merchants place merchandise at key points to attract quick purchases, they are appealing to which of the following consumer buying motives?

41.                rational buying

42.                emotional buying

43.                impulse buying

44.                economizing

 

 

 

MATCHING

 

Match each term with the correct definition or description below. Write the letter of the term on the answer sheet.

 

1.   advertising

2.   cost-plus pricing

3.   cost-push inflation

4.   demand-pull inflation

5.   hyperinflation

6.   inflation

7.   productivity

8.   target audience

9.   time value of money

10.                value-based pricing

 

41.                The concept that a dollar received in the future will be worth less than a dollar you receive today

 

42.                An increase in the general level of prices for goods and services

 

43.                A measure of the efficiency with which goods and services are made

 

44.                Rapidly rising, out-of-control prices

 

45.                Rising prices as a result of rising production costs

 

46.                A method of informing consumers about products and encouraging them to buy

 

47.                Setting prices based on how much consumers are willing to pay

 

48.                A specific group of people who are likely to buy a product

 

49.                Setting a price based on the production cost plus a markup

 

50.                Higher prices as a result of consumers wanting to buy more goods and services than producers supply

 

ANSWER SHEET                                                  Name ______________________________

 

 

TRUE/FALSE			MULTIPLE CHOICE			MATCHING
1.			21.			41.
2.			22.			42.
3.			23.			43.
4.			24.			44.
5.			25.			45.
6.			26.			46.
7.			27.			47.
8.			28.			48.
9.			29.			49.
10.			30.			50.
11.			31.
12.			32.
13.			33.
14.			34.
15.			35.
16.			36.
17.			37.
18.			38.
19.			39.
20.			40.

 

 

CH05 Test

 

TRUE/FALSE

 

Indicate whether the statement is true or false by writing T for True or F for False on the answer sheet.

 

1.   A checking account is a form of demand deposit.

 

2.   With an automatic withdrawal, money is added to your account electronically.

 

3.   An ATM card can be used to withdraw money from a checking account.

 

4.   A restrictive endorsement transfers the right to cash a check to someone else.

 

5.   The writer of a check is called the drawer.

 

6.   Checks that have been processed are called transposed checks.

 

7.   Checking accounts sometimes pay interest and may require a minimum balance in order to avoid a monthly service fee.

 

8.   The FDIC insures checking account deposits and savings account balances in all banks.

 

9.   A savings account is a demand deposit that may have some restrictions on how quickly or easily the money can be withdrawn.

 

10.                A certificate of deposit (CD) is a demand deposit that allows you to withdraw your money at any time without penalty.

 

11.                Money market accounts pay the market rate of interest on the money deposited.

 

12.                U.S. savings bonds pay a guaranteed rate of interest regardless of how long you keep the bond.

 

13.                Money placed in an IRA may be tax-deductible when deposited.

 

14.                With a stop payment order, the bank is instructed not to honor a check you issued or lost.

 

15.                A stored value card is a smart card, which is a credit card with a fixed rate of interest.

 

16.                Relationship banking is one way to reduce your costs of banking services while maximizing your value.

 

17.                Inactive accounts do not have balances and are not charged monthly fees.

 

18.                Floating a check is a common consumer practice that makes effective use of a checking account.

 

19.                The Federal Reserve System regularly examines financial institutions to ensure compliance with consumer protection laws.

 

20.                The FDIC insures all types of deposits, including checking, saving, money market, and certificates of deposit.

 

 

MULTIPLE CHOICE

 

Write the letter of the choice that best completes the statement or answers the question on the answer sheet.

 

21.                You have invested $500 at 9 percent interest. According to the Rule of 72, how soon will the money double in value?

22.                4 years

23.                6 years

24.                8 years

25.                12 years

 

22.                You deposited $1,000 at 5 percent interest compounded annually for 3 years. What is the amount of interest and principal you will have by the end of the 3 years?

23.                $1,157.63

24.                $1,102.50

25.                $52.50

26.                $55.13

 

23.                A check issued against bank funds is called a

24.                cashier’s check

25.                money order

26.                traveler’s check

27.                all of the above

 

24.                A checking account

25.                is a time deposit account

26.                may incur a charge for each check written

27.                is a demand deposit account

28.                both b and c

 

25.                A card that carries an electronic balance is called a(n)

26.                ATM card

27.                debit card

28.                smart card

29.                all of the above

 

26.                A written order to a bank to pay the stated amount to the person or business named is a(n)

27.                deposit

28.                check

29.                endorsement

30.                withdrawal

 

27.                Money added to a checking or savings account is called a(n)

28.                deposit

29.                withdrawal

30.                endorsement

31.                income

 

28.                Money deducted from a checking account and transferred electronically to another party is called a(n)

29.                check

30.                deposit

31.                automatic withdrawal

32.                automatic deposit

 

29.                The FDIC does not insure

30.                checking accounts

31.                savings accounts

32.                mutual funds

33.                certificates of deposit

 

30.                Each person who is authorized to write checks on an account must a complete a

31.                checkbook register

32.                deposit slip

33.                bank reconciliation

34.                signature card

 

31.                A tool used to track checks, withdrawals, deposits, and fees for your checking account is a

32.                checkbook register

33.                deposit slip

34.                bank reconciliation

35.                signature card

 

32.                Writing For Deposit Only and then signing your name on the back of a check is a(n)

33.                blank endorsement

34.                restrictive endorsement

35.                special endorsement

36.                endorsement in full

 

33.                The balance on your bank statement dated July 31 is $832.50. Your bank statement shows a monthly service fee of $6.00. Your check register balance on August 2 is $948.85. Your check register shows one deposit in transit dated July 30 for $200.35. You have two outstanding checks: No. 580 for $40.00 and No. 582 for $50.00. What is the adjusted balance for the checkbook register and the bank statement?

34.                $1,032.85

35.                $942.85

36.                $948.85

37.                $984.50

 

34.                If you deposit $500 for 6 months at an annual interest rate of 7 percent, how much interest will you earn?

35.                $350.00

36.                $35.00

37.                $17.50

38.                $7.50

 

 

35.                U.S. savings bonds

36.                do not pay a guaranteed rate of interest

37.                may be purchased at the TreasuryDirect website

38.                are discount bonds issued by a state government

39.                both b and c

 

36.                For how many years do most savings bonds earn interest?

37.                1 year

38.                10 years

39.                20 years

40.                30 years

 

37.                Which of the following financial institutions is not likely to be insured by the FDIC?

38.                commercial banks

39.                online-only banks

40.                brokerage firms

41.                savings banks

 

38.                Which of the following can result in “bouncing” a check?

39.                stop payment order

40.                nonsufficient funds

41.                cashier’s check

42.                money order

 

39.                When a paper check is transformed into a digital image, it is called a

40.                traveler’s check

41.                cashier’s check

42.                canceled check

43.                truncated check

 

40.                An advantage of Internet banking includes all of the following except

41.                statements cannot be printed, making them more secure

42.                account balances can be checked at any time

43.                money can be transferred between accounts easily

44.                bills can be paid electronically

 

 

 

MATCHING

 

Match each term with the correct definition or description below. Write the letter of the term on the answer sheet.

 

1.   bank reconciliation

2.   bounced check

3.   compound interest

4.   endorsement

5.   maturity value

6.   money order

7.   postdated check

8.   Rule of 72

9.   safe deposit box

10.                stop payment

 

41.                Interest earned on both principal and previously earned interest

 

42.                An instruction to the bank not to honor a check that has been issued or lost

 

43.                A bond’s future value as stated on its face

 

44.                The process of adjusting the checkbook register and bank statement balances so that they agree

 

45.                A check written with a date that will occur in the future

 

46.                A secure container located in a bank vault

 

47.                A signature, with or without instructions, written on the back of a check

 

48.                A formula for computing how long it will take to double money invested at a given rate

 

49.                A check that is not honored by a bank and is returned to the payee’s bank due to nonsufficient funds

 

50.                A type of check used to pay bills or make payments for which the money is guaranteed

 

ANSWER SHEET                                                  Name ______________________________

 

 

TRUE/FALSE			MULTIPLE CHOICE			MATCHING
1.			21.			41.
2.			22.			42.
3.			23.			43.
4.			24.			44.
5.			25.			45.
6.			26.			46.
7.			27.			47.
8.			28.			48.
9.			29.			49.
10.			30.			50.
11.			31.
12.			32.
13.			33.
14.			34.
15.			35.
16.			36.
17.			37.
18.			38.
19.			39.
20.			40.