Personal Finance Economics

1. Personal Finance Economics Practice Questions

2. Bethany wants to save for retirement. However, she is no expert in investing and needs someone who knows more than her helping her handle her money wisely. Bethany doesn’t desire to get rich quick; she just wants to know that her money is growing over the next thirty years until she is 65. Since Bethany’s top priority seems to be steady growth and security for her money, the BEST option for her would be • Put all of her savings in the stock market in a company that is currently performing well • Put all of her money in a relatively unknown stock that is likely to do well • Invest in a mutual fund • Purchase collateral

3. Michael’s boss has expressed his displeasure with Michael’s job performance recently at work. She tells Michael that if he does not get his department in order, he will soon be demoted from his current position. Michael’s boss is attempting to motivate him with • A low rate of interest • A negative incentive • A rational decision making process • A set principle

4. Having a college degree often results in • Higher worker earnings • Compound interest • A lower discount rate • A lower credit score

5. Barbara and Chad are starting their own business. However, because their funds are limited, they will need a loan from the bank to purchase some of the equipment they need. They will also have to charge a number of items to their new business credit card. Barbara and Chad are purchasing all of these items • For less than the principal • In hopes that interest rates are high • On credit • As lenders

6. George deposits $100,000 in Winder First Bank. A year later, he borrows $100,000 from the same bank to finance his son’s college education. Which of the following statements is true? • George did not have to prove he had collateral • George is being paid compound interest by the bank • George is being charged more interest than he’s earning • George is earning more interest than he’s charged

7. The government’s fiscal policy affects private citizens because it • Determines how high interest rates are • Determines how much money they have available to spend • Lowers their credit score • Makes it harder for them to qualify for insurance

8. Timothy owns a restaurant in downtown Athens. Timothy would probably like it if • The Fed would raise the reserve requirement • The Fed would buy bonds • Congress would raise taxes • There was a higher discount rate

9. Belinda and Keith have identical credit histories. They each take out a $20,000 loan at 6% over 12 years from the same lender. However, at the end of 12 years, Belinda has paid the lender roughly $40,000 while Keith has only paid $34,000. The reason for the difference is most likely because • Belinda and Keith each had different principals • Belinda had a lower credit score than Keith • Belinda’s loan paid compound interest while Keith’s paid simple interest • The lender discriminates against women

10. Your credit worthiness is determined LEAST by which of the following? • Credit score • Collateral • Amount of debt • Tax rate