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Financial Literacy Exam Review Questions with Correct Answers
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Consumer - Answer-A person or organization that uses a product or service Credit - Answer-The granting of a loan and the creation of debt; any form of deferred payment Debt - Answer-An obligation of repayment owed by one party (the debtor/borrower) to a second party (the creditor/lender); in ...

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  • October 12, 2024
  • 38
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • financial literacy exam review questions with corr
  • consumer answer a person or organization that us

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Financial Literacy Exam Review
Questions with Correct Answers
Consumer - Answer-A person or organization that uses a product or service

Credit - Answer-The granting of a loan and the creation of debt; any form of deferred
payment

Debt - Answer-An obligation of repayment owed by one party (the debtor/borrower) to a
second party (the creditor/lender); in most cases this includes repayment of the original
loan amount plus interest

Economy - Answer-A system by which goods and services are produced and distributed

Financial Literacy - Answer-The knowledge and skillset necessary to be an informed
consumer and manage finances effectively

Loan - Answer-A debt evidenced by a "note," which specifies the principal amount,
interest rate, and date of repayment

Loan shark - Answer-A person or business that offers loans at extremely high interest
rates

Personal Finance - Answer-All of the decisions and activities of an individual or family
regarding their money, including spending, saving, budgeting, etc.

Interest - Answer-A fee paid by a borrower to the lender for the use of borrowed money;
typically interest is calculated as a percentage of the principal (original loan amount)

Recession - Answer-A period of temporary economic decline during which trade and
industrial activity are reduced; generally identified by a fall in gross domestic product
(GDP)

Which of the following is not a factor in becoming money smart?
A. Have knowledge of basic math
B. Learn the language of money
C. Manage your behavior with money
D. Learn how to read your credit card statements - Answer-D. Learn how to read your
credit card statements

True or False: True financial security is achieved when your money begins to generate
an income; your money starts working for you - Answer-True

,During the Great Depression, New Deal policymakers came up with mortgage (home
loans) and consumer lending policies that convinced commercial banks that:
A. Consumers would not be willing to use credit, since borrowing money for large
purchases had not previously been an option for the middle class
B. They would not be able to compete with loan sharks in the industry of consumer
lending
C. Consumer credit could be profitable
D. Consumer credit was not a profitable industry - Answer-C. Consumer credit could be
profitable

When it comes to managing money, success is about ___% knowledge and ___%
behavior.
A. 50, 50
B. 60, 40
C. 80, 20
D. 20, 80 - Answer-D, 20, 80

Which of the following is a consequence of spending more than you make?
A. Missed opportunity to save and invest
B. Stress
C. A cycle of debt
D. All of the above - Answer-D. All of the above

True or False: Since you are a teenager, what you do now with money will have little
effect on your financial future - Answer-False

True or False: Everyone should have the same financial plan. A budget that works for
one person should be sufficient for everyone - Answer-False

When it comes to personal finance, the math is easy. Whatʹs challenging is managing
your ___________.
A. Income
B. Friends
C. Bank account
D. Behavior - Answer-D. Behavior

Which of the following statements best explains why income alone does not determine
wealth?
A. Investing is the only factor that contributes to wealth building
B. Income alone does determine a personʹs wealth
C. Only people who are natural savers can become wealthy
D. How much money a person makes does not dictate his or her spending and saving
behavior - Answer-D. How much money a person makes does not dictate his or her
spending and saving behavior

,True or False: Most Americans avoid the use of credit when it comes to buying big-
ticket items like a car or furniture for their home - Answer-False

True or False: Expensive houses and new cars are a true indication of wealth - Answer-
False

True or False: Most Americans today are wealthy and will have financial security when
they retire - Answer-False

Which of the following is not a true statement?
A. Americans learned to borrow amidst post-WWII prosperity
B. The credit industry in America has not changed much since 1917
C. After 1970, consumer debt skyrocketed
D. As banks made higher profits, they were willing to lend more money to consumers -
Answer-B. The credit industry in America has not changed much since 1917

Which of the following best explains why students should learn about personal finance?
A. Learning to manage money at this stage can eliminate financial mistakes and
promote huge financial benefits for the future
B. Personal finance skills are better learned through trial and error
C. Personal finance skills are highly complex and require a great deal of time to learn
D. Learning to manage money will help you achieve a profitable career - Answer-A.
Learning to manage money at this stage can eliminate financial mistakes and promote
huge financial benefits for the future

Which of the following is not a benefit of understanding your own money personality?
A. Recognizing who you are allows you the opportunity to grow and learn
B.Once you know your money personality, you can develop a financial plan that works
for you
C. Knowing your money personality allows you to excuse excessive spending because
it is simply part of your nature
D. None of the above - Answer-C. Knowing your money personality allows you to
excuse excessive spending because it is simply part of your nature

Which of the following is not a reason credit is marketed heavily to consumers in the
United States?
A. The credit industry has become extremely profitable
B. There is strong consumer demand for big-ticket items
C. Since 1920, credit laws in the United States have been relaxed in an attempt to
create a mainstream alternative to loan sharks for the working class
D. The use of credit is not socially accepted in the United States - Answer-D. The use of
credit is not socially accepted in the United States

Why was the use of credit uncommon prior to 1917?
A. Laws prevented lenders from charging high interest rates
B. Borrowing money was generally not socially acceptable

, C. Lending money to others was not profitable
D. All of the above - Answer-D. All of the above

True or False: Learning the language of money is not that important because you will be
able to depend on financial planners to manage your money - Answer-False

Key components of financial planning include all of the following except:
A. Write out a detailed plan for accomplishing your goals
B. Replace money myths with money truths
C. Allow your financial planner to make all of your major money decisions
D. Regularly monitor and reassess your financial plan - Answer-C. Allow your financial
planner to make all of your major money decisions

The widespread financial insecurity of Americans is primarily because:
A. The incomes of Americans are low
B. The saving rate of Americans is low and many borrow in order to spend more than
they earn
C. Government programs are unavailable to help people when they are disabled or
experience unemployment
D. Most Americans save a high proportion of their income - Answer-B. The saving rate
of Americans is low and many borrow in order to spend more than they earn

Personal financial success is primarily the result of:
A. Managing your money behavior
B. Winning the lottery
C. Generous welfare and unemployment programs
D. Inheriting money from your parents - Answer-A. Managing your money behavior

Which of the following statements best describes how Americans are being outsmarted
by banks and other lenders?
A. 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
B. We are taught that we can buy happiness
C. Buying things on credit has become acceptable in our culture
D. We are driven by consumerism - Answer-A. 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

True or False: 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 - Answer-True

True or False: 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 - Answer-True

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