Ch. 1: Introduction to Personal Finance – Flashcards
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A system by which goods and services are produced and distributed
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Economy
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A fee paid by a borrower to the lender for the use of borrowed money.
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Interest
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A period of temporary economic decline during which trade and industrial activity are reduced; generally identified by a fall in gross domestic product (GDP)
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Market Economy
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A debt evidenced by a ʺnote,ʺ which specifies the principal amount, interest rate and date of repayment
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Loan
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An obligation of repayment owed by one party to a second party
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Debt
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A person or organization that uses a product or service
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Consumer
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The knowledge and skillset necessary to be an informed consumer and manage finances effectively
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Financial Literacy
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The granting of a loan and the creation of debt; any form of deferred payment
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Credit
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When developing a personal financial plan, one of the first things you should do is assess your current financial situation. This includes your income, assets and liabilities.
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True
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Expensive houses and new cars are a true indication of wealth.
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False
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A person or business that offers loans at extremely high interest rates
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Loan Sharks
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Everyone should have the same financial plan. A budget that works for one person should be sufficient for everyone.
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False
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Learning the language of money is not that important because you will be able to depend on financial planners to manage your money.
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False
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Most Americans avoid the use of credit when it comes to buying big -ticket items like a car or furniture for their home.
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False
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The credit system today is structured to accommodate a state of uncertain employment and income instability, utilizing high interest rates and fees to turn huge profits.
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True
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Having debt keeps you from building wealth.
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True
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During the Great Depression, New Deal policymakers came up with mortgage (home loans) and consumer lending policies that convinced commercial banks that:
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Consumer Credit could be profitable
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True financial security is achieved when your money begins to generate an income -your money starts working for you.
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True
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Since you are a teenager, what you do now with money will have little effect on your financial future.
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False
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Most Americans today are wealthy and will have financial security when they retire.
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False
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Which of the following is not a benefit of understanding your own money personality?
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Knowing your money personality allows you to excuse excessive spending because it is simply part of your nature.
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Why was the use of credit uncommon prior to 1917?
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Laws prevented lenders from charging high interest rates. Borrowing money was generally not socially acceptable. Lending money to others was not profitable.
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When it comes to personal finance, the math is easy. Whatʹs challenging is managing your _____.
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Behavior
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Which of the following is not a reason credit is marketed heavily to consumers in the United States?
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The use of credit is not socially accepted in the United States.
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Which of the following is not a true statement?
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The credit industry in America has not changed much since 1917.
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When it comes to managing money, success is about ___% knowledge and ___% behavior.
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20, 80
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The widespread financial insecurity of Americans is primarily because:
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The saving rate of Americans is low and many borrow in order to spend more than they earn
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Which of the following is not a factor in becoming money smart?
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Learn how to read your credit card statements
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Which of the following statements best describes how Americans are being outsmarted by banks and other lenders?
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Credit is marketed so well that we desire to have it while completely dismissing the fact that interest rates and fees continue to destroy our financial well-being.
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Personal financial success is primarily the result of:
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Managing your money behavior
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Which of the following statements best explains why income alone does not determine wealth?
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How much money a person makes does not dictate his or her spending and saving behavior.
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Which of the following is a consequence of spending more than you make?
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Missed opportunity to save and invest Stress A cycle of debt
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Key components of financial planning include all of the following :
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Write out a detailed plan for accomplishing your goals Replace money myths with money truths Regularly monitor and reassess your financial plan
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Which of the following best explains why students should learn about personal finance?
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Learning to manage money at this stage can eliminate financial mistakes and promote huge financial benefits for the future.
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All of the decisions and activities of an individual or family regarding their money, including spending, saving, budgeting, etc.
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personal finance
