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Finance Final
| Question | Answer |
|---|---|
| What is monetary policy? | Actions by the Federal Reserve to control the money supply and interest rates. |
| What is inflation? | A general increase in prices over time, reducing purchasing power. |
| What is a recession? | A period of economic decline with reduced spending and higher unemployment. |
| What is a depression? | A severe and long-lasting economic downturn. |
| What is the FDIC insurance amount? | $250,000 per depositor, per insured bank. |
| What is liquidity? | How quickly an asset can be turned into cash. |
| What is a credit union? | A nonprofit financial institution owned by its members. |
| What is the Consumer Price Index (CPI)? | Measures change in inflation. |
| What is compound interest? | Interest earned on both the original amount and previously earned interest. |
| How does the Federal Reserve restrict/contract the money supply? | By raising interest rates, selling government securities, and increasing reserve requirements. |
| How does the Federal Reserve expand the money supply? | By lowering interest rates, buying government securities, and decreasing reserve requirements. |
| How are the Federal Reserve, inflation, unemployment, and economic growth connected? | The Federal Reserve adjusts interest rates to balance inflation, unemployment, and economic growth. |
| What is a stop payment order? | A request to a bank to prevent a check from being cashed. |
| What is an overdraft charge? | A fee charged when you spend more money than is in your account. |
| What is a minimum balance charge? | A fee charged when your account balance falls below a required amount. |
| What are the responsibilities of the Federal Reserve? | Controlling the money supply, supervising banks, and promoting economic stability. |
| How do debit cards work? | They withdraw money directly from your checking account. |
| How do ATMs work? | They allow electronic banking transactions like withdrawals and deposits. |
| What fees can ATMs charge? | Out-of-network fees and bank service fees. |
| How do banks earn most of their profits? | By charging interest on loans. |
| How does a shortage in supply affect prices? | Prices usually increase when supply is low and demand is high. |
| How can you limit identity theft and fraud? | Use strong passwords, monitor accounts, shred documents, and avoid sharing personal information. |
| What is the purpose of reconciling your bank account? | To ensure your records match the bank’s records and find errors or fraud. |
| What is a credit card statement? | A summary of charges, payments, interest, and balance for a billing cycle. |
| What is credit? | The ability to borrow money and pay it back later. |
| What is a grace period? | The time to pay a credit card bill without interest, usually about 21–25 days. |
| What is a cosigner? | Someone who agrees to repay a loan if the borrower cannot. |
| What is collateral? | Property pledged to secure a loan. |
| What is an annual fee? | A yearly charge for using a credit card. |
| What is APR? | Annual Percentage Rate; the yearly cost of borrowing money. |
| What is a credit limit? | The maximum amount you can borrow on a credit card. |
| What is a minimum payment? | The smallest amount required to keep the account in good standing. |
| What is a late fee? | A penalty charged for missing a payment deadline. |
| What is foreclosure? | When a lender takes a home because mortgage payments were not made. |
| What is repossession? | When a lender takes back property, like a car, for missed payments. |
| What is wage garnishment? | Money taken directly from a paycheck to repay debt. |
| What are three ways to establish good credit? | Pay bills on time, keep balances low, and use a secured credit card or become an authorized user. |
| How can you rebuild credit? | Make payments on time, reduce debt, and check credit reports for errors. |
| What is the function of a credit bureau? | To collect and report credit information. |
| What are the three major credit bureaus? | Experian, Equifax, and TransUnion. |
| How does a debit card differ from a credit card? | Debit uses your money immediately; credit borrows money. |
| What should you look for when choosing a credit card if you don’t pay in full? | Low APR and low fees. |
| What are disadvantages of credit cards? | Interest charges, debt, and overspending. |
| What does Chapter 13 Bankruptcy allow? | A repayment plan with creditors over time. |
| What is the purpose of the Fair Credit Reporting Act? | To protect accuracy and privacy of credit reports. |
| What determines the monthly payment of a loan? | Loan amount, interest rate, and loan length. |
| Why should you get three free credit reports? | To check for mistakes or fraud from all three bureaus. |
| What lowers your credit score? | Late payments, high balances, too much debt, and missed payments. |
| What are disadvantages of cash advances? | High fees and immediate interest charges. |
| What are advantages of leasing a car? | Lower monthly payments and newer cars. |
| What are disadvantages of leasing a car? | Mileage limits and no ownership. |
| What are advantages of buying a new car? | Reliability and warranty coverage. |
| What are disadvantages of buying a new car? | Higher cost and fast depreciation. |
| What are advantages of buying a used car? | Lower price and slower depreciation. |
| What are disadvantages of buying a used car? | More repairs and less warranty coverage. |
| What is opportunity cost? | The value of the next best alternative given up. |
| What is depreciation? | A decrease in value over time. |
| How can Edmunds help with car buying? | Provides reviews and pricing information. |
| How can Kelley Blue Book help with car buying? | Estimates vehicle value. |
| How can Autotrader help with car buying? | Helps find cars for sale. |
| How can CARFAX help with car buying? | Provides vehicle history reports. |
| Do cars usually appreciate or depreciate? | Depreciate. |
| Do houses usually appreciate or depreciate? | Usually appreciate. |
| What is refinancing? | Replacing a loan with a new one, usually for better terms. |
| What is a lease? | A contract to rent property. |
| What is a landlord? | A property owner who rents to tenants. |
| What is a tenant? | A person renting property. |
| What is a security deposit? | Money paid upfront to cover possible damages. |
| What is an eviction notice? | A warning requiring a tenant to leave the property. |
| What can happen if you break a lease? | Fees, eviction, or legal action. |
| What are advantages of buying a home? | Building equity and stable payments. |
| What are disadvantages of buying a home? | Maintenance costs and less flexibility. |
| What are advantages of renting? | Flexibility and fewer maintenance responsibilities. |
| What are disadvantages of renting? | No equity and possible rent increases. |
| What is an advantage of a 30-year mortgage? | Lower monthly payments. |
| What is an advantage of a 15-year mortgage? | Less interest paid overall. |
| What is renters insurance? | Insurance covering a renter’s belongings and liability. |
| Who is responsible for personal belongings during fires or weather damage in an apartment? | The tenant, usually through renters insurance. |
| What is an insurance policy? | A contract between the insurer and policyholder. |
| What is a deductible? | The amount paid out-of-pocket before insurance pays. |
| What is a policyholder? | The person who owns the insurance policy. |
| What is a claim? | A request for insurance payment. |
| What is a beneficiary? | A person who receives insurance benefits. |
| What is disability insurance? | Insurance that replaces income if you cannot work. |
| What is renters insurance? | Insurance covering personal property and liability while renting. |
| What is the relationship between premiums and deductibles? | Higher deductibles usually mean lower premiums. |
| What is a PPO? | A health plan with more provider flexibility. |
| What is an HMO? | A health plan requiring network doctors and referrals. |
| What is the difference between Medicare and Medicaid? | Medicare is mainly for people 65+, while Medicaid is for low-income individuals. |
| What is term life insurance? | Coverage for a specific period of time. |
| What is whole life insurance? | Permanent life insurance with cash value. |
| What is an advantage of term life insurance? | Lower cost. |
| What are auto liability coverage limits? | The maximum amount insurance pays for injuries or damages. |
| What is the Illinois minimum auto coverage law? | 25/50/20 liability coverage. |
| Why is health insurance important? | It helps pay expensive medical bills. |
| What risks come with not having health insurance? | High medical costs and financial hardship. |
| What is bodily injury coverage? | Pays for injuries caused to others. |
| What is property damage coverage? | Pays for damage caused to another person’s property. |
| What are medical payments coverage? | Pays medical expenses after an accident. |
| What is comprehensive coverage? | Covers non-collision damage like theft or weather. |
| What is collision coverage? | Covers damage from crashes. |
| What is uninsured motorist coverage? | Covers costs if hit by an uninsured driver. |
| What is a W-4? | A form telling employers how much tax to withhold. |
| How do allowances on a W-4 affect paychecks? | More allowances mean less tax withheld. |
| What is a W-2? | A form showing yearly wages and taxes withheld. |
| What is a 1099-INT? | A form reporting interest income. |
| What is a dependent? | Someone financially supported by another person. |
| What is the deadline for filing federal income taxes? | Usually April 15. |
| What tax structure does the U.S. use? | Progressive tax system. |
| What tax structure does Illinois use? | Flat tax system. |
| What is the major source of income for schools? | Property taxes. |
| What is the biggest source of federal government income? | Income taxes. |
| What is the standard deduction? | A fixed amount reducing taxable income. |
| What are itemized deductions? | Specific expenses deducted instead of the standard deduction. |
| What is included in FICA taxes? | Social Security and Medicare taxes. |
| How do you determine a refund or amount owed? | Compare taxes owed to taxes already withheld. |
| Who collects and audits taxes? | The IRS. |
| What is fiscal policy? | Government use of taxes and spending to influence the economy. |
| How does fiscal policy help the economy? | The government adjusts taxes and spending to control inflation and unemployment. |
| What is a 401(k)? | An employer-sponsored retirement savings plan. |
| What is a 403(b)? | A retirement plan for nonprofit/public employees. |
| What is a Traditional IRA? | A retirement account with tax-deferred growth. |
| What is a Roth IRA? | A retirement account with tax-free withdrawals in retirement. |
| What is an advantage of retirement accounts? | Tax benefits and long-term growth. |
| How do stocks and bonds differ? | Stocks represent ownership; bonds are loans. |
| Which is generally riskier: stocks or bonds? | Stocks. |
| How does a stockbroker make money? | Through commissions and fees. |
| What is a mutual fund? | A collection of investments managed together. |
| What are three advantages of mutual funds? | Diversification, professional management, and convenience. |
| What is asset allocation? | Dividing investments among different asset types. |
| Give an example of asset allocation. | Younger investors may own more stocks and fewer bonds. |
| What is a dividend? | A payment to shareholders from profits. |
| What is capital gains tax? | Tax on profits from selling investments. |
| What is liquidity? | How quickly an asset can become cash. |
| What is risk vs. return? | Higher returns usually involve higher risk. |
| What is diversification? | Spreading investments to reduce risk. |
| What is a bond? | A loan made to a company or government. |
| What is an IPO? | Initial Public Offering; when a company first sells stock publicly. |
| What is a bull market? | A market with rising prices. |
| What is a bear market? | A market with falling prices. |
| What is a stock index? | A measurement of a group of stocks. |
| What are examples of stock indexes? | NYSE and S&P 500. |
| What is the purpose of the SEC? | To regulate and protect investors in financial markets. |
| Why is starting to invest early important? | Compound growth increases wealth over time. |
| How can bad news affect stock prices? | Prices usually decrease. |
| What does a stock chart show? | Changes in a stock’s price over time. |
| What makes a good resume? | Clear formatting, relevant experience, and no errors. |
| How long should a resume usually be? | One page for most students. |
| In what order should jobs be listed on a resume? | Reverse chronological order. |
| What should you do when the interviewer finishes asking questions? | Ask thoughtful questions and thank them. |
| Who makes good job references? | Teachers, supervisors, coaches, or employers. |
| What should you do before an interview? | Research the company and prepare answers. |
| What should you do during an interview? | Dress professionally, make eye contact, and answer clearly. |
| What should you do after an interview? | Send a thank-you message. |
| What is a salary? | Fixed yearly pay. |
| What is commission? | Earnings based on sales performance. |
| What is a wage? | Hourly pay for work. |
| What is a career? | A long-term professional path. |
| What is a job? | Work done to earn money. |
| Why are benefits important when comparing job offers? | They add value through insurance, retirement plans, and paid time off. |
| What legal issues can affect your ability to get a job? | Criminal records or lack of required work documents/licenses. |
| How can you build your resume as a student? | Volunteering, clubs, sports, leadership, and part-time jobs. |
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