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Chapter 1 Review1. Personal financial planning has the main goal ofa. savings and investing for future needs.b. reducing a person’s tax liability.c. putting money to work and living within your means.d. spending to achieve financial objectives.e. savings, spending, and borrowing based on current needs.2. The success of a financial plan will be determined bya. the amount of income available.b. the stage of the adult life cycle.c. a person’s tax status.d. how resources are used.e. current economic conditions.3. The stages that an individual goes through based on age, financial needs, andfamily situation is called thea. financial planning process.b. budgeting procedure.c. personal economic cycle.d. adult life cycle.e. Tax planning process.4. Risks associated with most financial decisions are fairly easy to measure.a. True.b. False5. A major activity in the planning component of financial planning isa. selecting insurance coverage.b. evaluating investment alternatives.c. gaining occupational training and experience.d. allocating current resources for spending.e. establishing a line of credit.6. An example of a personal opportunity cost would bea. interest lost by using savings to make a purchase.b. higher earnings on savings that must be kept on deposit a minimum of sixmonths.c. lost wages due to continuing as a full-time student.d. time comparing several brands of personal computers.e. having to pay a tax penalty due to not having enough withheld from yourmonthly salary.7. Changes in income, values, and family situation make it necessary toa. evaluate and revise your actions.b. implement the financial plan.c. develop financial goals.d. analyze your current personal and financial situation.e. create a financial plan of action.Chapter 1 ReviewPersonal Finance 1200-C1
8. Attempts to increase income are part of the ________ component of financialplanning.a. planningb. obtainingc. savingd. sharinge. protecting9. A question associated with the saving component of financial planning is:a. Do you have an adequate emergency fund?b. Is your will current?c. Is your investment program appropriate to your income and tax situation?d. Do you have a realistic budget for your current financial situation?e. Are your transportation expenses minimized through careful planning?10. The amount of interest is determined by multiplying the amount in savings by thea. annual interest rate.b. time period.c. number of months in a year.d. time period and number of months.e. annual interest rate and the time period.11. Reduced funds available for investment in our economy could result froma. expanded savings by consumers.b. higher exports than imports.c. reduced spending for consumer goods.d. higher imports than exports.12. Higher prices are likely to result froma. lower demand by consumers.b. increased production by businesses.c. lower interest rates.d. increased spending by consumers.e. an increase in the supply of a product.13. The ability to convert financial resources into usable cash with ease is referred toasa. bankruptcy.b. liquidity.c. investing.d. saving.e. opportunity cost.14. With an inflation rate of 9 percent, prices would double in about ____ years.a. 4b. 6c. 8d. 10e. 12Chapter 1 ReviewPersonal Finance 1200-C2
15. The financial planning process concludes with efforts toa. develop financial goals.b. create a financial plan of action.c. analyze your current personal and financial situation.d. review the financial plan.e. review and revise your actions.16. Short-term goals are usually achieved within the next year or so.a. True.b. False.17. The changing cost of money is referred to as _____ risk.a. interest-rate.b. inflation.c. economic.d. trade-off.e. personal.18. Which of the following goals would be the easiest to implement and measure itsaccomplishment?a. “Reduce our debt payments.”b. “Save funds for an annual vacation.”c. “Save $100 a month to create a $4,000 emergency fund.”d. “Invest $2,000 a year for retirement.”19. A decrease in the demand for a product or service may result in a decrease inwages for people producing that item.a. True.b. False.20. The main economic influence that determines prices isa. the stock market.b. interest rates.c. employment.d. government spending.e. supply and demand.Chapter 1 ReviewPersonal Finance 1200-C3