1. Understanding the Financial Process
Copyright Cengage Learning. Powered by Cognero.
Page 32
e. technological
83. Which of the following statements about the earning power of an individual is true?
a. Income varies across different geographic locations due to varying costs of living.
b. Heads of households who have less formal education earn more.
c. Career planning does not help in improving earning potential.
d. People who are very old have high incomes.
e. Marital status has no impact on an individual’s personal income.
84. Career planning:
a. does not require any goal setting.
b. is not related to personal financial planning.
c. does not influence an individual’s lifetime earnings.
d. impacts an employer’s stability.
e. helps in improving professional satisfaction.
1. Understanding the Financial Process
Copyright Cengage Learning. Powered by Cognero.
Page 33
85. The best way to achieve your financial objectives is to:
a. have a luxurious standard of living.
b. spend your money at once to reach your objectives swiftly.
c. develop a sound financial plan.
d. create a good tax deferment strategy.
e. monitor your spending.
86. ______ plans are most helpful in making decisions regarding retirement.
a. Personal financial
b. Insurance
c. Estate
d. Business
e. Spending
87. The purchase of a car is an example of:
a. consuming.
b. investing.
c. saving.
d. deferring.
e. distributing.
1. Understanding the Financial Process
Copyright Cengage Learning. Powered by Cognero.
Page 34
RATIONALE: Tangible assets are physical assets such as real estate and automobiles. These assets can be held for either
consumption (e.g., your home, car, artwork, or jewelry) or investment purposes (e.g., a duplex purchased for rental
88. The purchase of ____________ is an example of the purchase of a financial asset.
a. a home
b. stocks
c. a car
d. jewelry
e. a vacation home
89. One trend with a profound effect on people’s standard of living is the ____________, which requires greater
responsibility to manage money wisely.
a. single-income family
b. two-income family
c. investment family
d. retirement-income family
e. government
1. Understanding the Financial Process
Copyright Cengage Learning. Powered by Cognero.
Page 35
90. A carefully developed financial plan should provide for saving a portion of ____________ for deferred, future
spending.
a. retirement funds
b. investment funds
c. current income
d. future income
e. tangible assets
91. Regardless of income or wealth, setting aside some portion of current income regularly for future use increases the
amount of:
a. savings.
b. tax-exempt income.
c. deferred tax.
d. employee benefits.
e. tangible assets.
92. Personal ______ is a systematic process that considers important elements of an individual’s monetary affairs in order
to fulfill monetary goals.
a. conflict resolving
b. financial planning
c. standard of living
1. Understanding the Financial Process
Copyright Cengage Learning. Powered by Cognero.
Page 36
d. legal counselling
e. wealth monitoring
93. ______ would be considered real property.
a. Stocks
b. Land
c. Cash
d. Bonds
e. Clothing
94. Income tends to ______ between the ages of 65 and 80.
a. increase
b. decrease
c. stabilize
d. fluctuate
e. decrease and then increase slowly
1. Understanding the Financial Process
Copyright Cengage Learning. Powered by Cognero.
Page 37
95. Sarah starts investing in an individual retirement account (IRA) at the age of 30 and earns 10 percent for 35 years. At
age 65, she will get less returns as compared to those returns if she:
a. starts investing at the age of 25.
b. invests at 12 percent.
c. invests for 45 years.
d. invests up to the age of 60.
e. earns 10 percent for 5 years and then 12 percent for 30 years.
96. Tax planning is most common among individuals with ______ income.
a. low
b. high
c. no
d. erratic
e. decreasing
97. In ______ plans, the employer allocates a certain amount of money to each employee and lets the employee spend that
1. Understanding the Financial Process
Copyright Cengage Learning. Powered by Cognero.
Page 38
a. cafeteria
b. fixed-benefit
c. estate
d. profit-sharing
e. saving
98. A decrease in the gross domestic product (GDP) would indicate that the economy is experiencing a(n):
a. expansion.
b. contraction.
c. deflation.
d. stagflation.
e. growth spurt.
99. Following an economic trough, the economy will often enter a(n):
a. expansion.
b. contraction.
c. deflation.
d. peak.
e. another trough.
1. Understanding the Financial Process
Copyright Cengage Learning. Powered by Cognero.
Page 39
100. The consumer price index (CPI) is a measure of:
a. unemployment.
b. inflation.
c. stagnation.
d. recession.
e. saving.
101. An individual’s salary will be lower if he or she lives in a(n) ______ area.
a. metropolitan
b. overpopulated
c. industrial
d. rural
e. well-developed
1. Understanding the Financial Process
Copyright Cengage Learning. Powered by Cognero.
Page 40
102. Heads of households who have more formal education:
a. pay more tax penalty.
b. earn more annual income.
c. save less money.
d. have less wealth.
e. have careers with less decision-making responsibility.
103. Our ______ is an important factor in determining how well we live.
a. income
b. age
c. credit
d. loan interest rate
e. savings
104. A person’s ______ leads to an increase in income potential in his or her career.
a. formal education
b. social status
c. marital status
d. corporate loyalty
e. family size
1. Understanding the Financial Process
Copyright Cengage Learning. Powered by Cognero.
Page 41