Earned Income
Income derived from active participation
in a trade or business, including wages, salary, tips,
commissions and bonuses.
Unearned Income
Any income that comes from investments and other sources unrelated to employment services. Examples: interest from a savings account, bon...
W!SE Financial Literacy Certification Test questions and answers
Earned Income - correct answer Income derived from active participation
in a trade or business, including wages, salary, tips,
commissions and bonuses.
Unearned Income - correct answer Any income that comes from investments and other sources unrelated to employment services. Examples: interest from a savings account, bond interest, alimony, and dividends from stock
Exemptions (aka allowance) and how they work - correct answer If you are not claimed as a dependent on another
taxpayer's return, then you can claim one personal tax
exemption. The exemption reduces your taxable income just like a deduction does, but has fewer restrictions to claiming it. If you are married and file a joint tax return, both you and your spouse each get an exemption.
Exemptions (aka allowance) and how they work PART 2 - correct answer The IRS allows you to take additional exemptions for each dependent you claim. Frequently, the source of these exemptions are the children who live with you for more than half the year, are under 19 years old (or under 24 if a full-time student) and who don't provide more than half of their own financial support during the tax year.
Liquidity - what does it mean? - correct answer The ability to convert an asset to cash quickly and with
minimal impact to the price.
Liquidity - what financial products are liquid? - correct answer Examples: Cash, Most stocks, money market instruments and government bonds. Gift cards - how do they work? - correct answer A gift card is a restricted monetary equivalent is issued by retailers or banks to be used as an alternative to a non-monetary gift.
Gift cards - how do they work - fees? - correct answer Prepaid cards, gift cards, and gift certificates cannot expire within five years of activation or unless the terms of the expiration are
clearly disclosed. The law bans dormancy fees, inactivity fees or service fees on gift cards unless there has been no activity in a 12-month period and the issuer clearly discloses all fees before the gift card is purchased.
Gift cards - how do they work - fees? (Exclusions) - correct answer Prepaid phone cards , re-
loadable cards, loyalty
or rewards cards, cards issued for admission to special
events or venues and certificates issued in paper form only are exempt.
Discretionary income and budget surplus - correct answer The amount of an individual's income
that is left for
spending, investing or saving after taxes and personal
necessities (such as food, shelter, and clothing) have been paid. Discretionary income includes money spent on luxury items, vacations and non-essential goods and services.
Money orders - high rate of counterfeits - correct answer A certificate that allows the stated payee to receive cash
on-demand, usually issued by governments and banking institutions. A money order functions much like a check, in that the person who purchased the money order may stop payment.
Why does the US currency have value? - correct answer Its value is only based on what we can get in exchange for it. Or put it another way, money has value as long as other people believe the money you give them can be
exchanged for the goods and services they desire in the
future. Opportunity cost - correct answer The second-best alternative (or the value of that
alternative) that must be given up when scarce resources are used for one purpose instead of another
Who is hurt the most and least with inflation - correct answer Inflation is a general increase in prices and a corresponding decrease in money's purchasing power.
Who is hurt the most with inflation? - correct answer Those on fixed incomes (retired people)
Who is hurt the least with inflation? - correct answer Borrowers and producers
Role of the treasury department - correct answer The United States Department of the Treasury
is the
government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills.
Role of the treasury department - correct answer The U.S. Treasury is responsible for the revenue of the U.S.
government, but here are some other key functions:
- Printing of bills, postage, Federal Reserve notes, and
minting of coins
- Collection of taxes and enforcement of tax laws (through
the IRS)
- Management of all government accounts and debt issues
- Overseeing U.S. banks
- Identifying and targeting the financial support networks
of national security threats
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