Economics EOC Quiz Answer Key Personal Finance Economics - (SSEPF4) Creditworthiness, (SSEPF5) Risk-management, (SSEPF6) Earnings

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1 Economics EOC Quiz Answer Key Personal Finance Economics - (SSEPF4) Creditworthiness, (SSEPF5) Risk-management, (SSEPF6) Earnings Student Name: Teacher Name: Heather Creamer 1) What is the relationship between credit and debt? A) Assuming debt means more credit will be extended. B) Being extended credit means debt has been assumed. C) Credit must be extended before debt can be assumed. D) Debt must be assumed before credit can be extended. Date: Score: Credit must be extended before debt can be assumed. Just because credit is extended does not mean debt is assumed; the borrower must use the credit before it becomes a debt. Likewise, assuming debt does not automatically mean more credit will be extended. 2) Which of these is the BEST example of debt? A) A person buys a new car. B) A person pays interest on a mortgage. C) A person deposits a paycheck into a savings account. D) A person withdraws money from a bank account using an ATM card. An example of debt is when a person pays interest on a mortgage. Debt is a financial obligation to repay a loan, while credit is the amount a borrower may use. Remember, too, that even though most people pay for cars in installments, many do pay cash for the entire value of the automobile and do not go into debt in the process. 3) Which of these factors should consumers research FIRST when they receive a credit card offer with a low introductory rate? A) the APR after the introductory period expires B) the cash advance features offered by the bank C) the type of card, such as secured, regular, or premium D) the availability of special programs, such as "cash back" programs Consumers should research the APR after the introductory period expires of any credit card offer with a low introductory rate. 4) Ravi receives a credit card offer in the mail. The offer contains a low introductory rate. Although all of these are important factors, which of these should he investigate FIRST before accepting the offer? A) the cash advance and ATM features B) the APR after the introductory period expires C) the type of card, such as secured, regular or premium D) availability of special programs, such as frequent flier miles Ravi should investigate the APR after the introductory period expires because the initial APR often increases after a set period of time. Information about most features of a credit card offer are given in a disclosure box that must appear in all credit card solicitations. 1/13

2 5) Most credit card offers use compounding interest. This is usually called the annual percentage rate, or APR. When the interest is compounded frequently, A) the APR goes up. B) the APR goes down. C) the balance grows faster. D) the balance grows slower. When the interest is compounded frequently, the balance grows faster. This results in you paying back much more than you would like to. Look for cards that compound it no more than once per month. 6) Why do banks and other financial institutions require collateral for loans? A) to raise needed funds B) banks want profit motives C) to reduce the risk of lending D) to assess the trustworthiness of the customer To reduce the risk of lending, financial institutions will require collateral before a loan is granted. Collateral is something of value that is forfeited if the loan is not repaid. 7) Derek's Credit Report Furniture City Brooklyn, NY Why would Derek be denied credit for a new car? A) He lives in Brooklyn, New York. B) He still owes a balance for his furniture. C) His payments are too high to afford a car payment. D) He has been late on payments and had account closed. Balance: $578 Date Open: 12/01/2011 Account Type: Installment High Balance: $2500 Terms: $115 for 24 months Pay Status: Late over 60 days Date Closed: 8/30/2012 by Company He has been late on payments and had account closed. Late payments lead to bad marks on a person's credit. If an account is closed because of late payments, that is another bad mark. 8) Shanna's mortgage company requires insurance coverage. Which type of insurance would she need? A) automobile B) disability C) life D) property Shanna would need proof of property insurance for a mortgage. This would protect not only her house but the goods she possesses inside of the house. 2/13

3 9) An insurance policy with a higher premium MOST LIKELY has A) a lower deductible. B) no liability limit. C) a higher deductible. D) a lower liability limit. An insurance policy with a higher premium MOST LIKELY has a lower deductible. The premium is the cost of the insurance, while the deductible is the amount of the loss that must be paid before the insurance company pays. 10) Sylvia is seriously injured when a tornado strikes, damaging her home, car, and leaving her unable to work for six months. Which insurance policy is she LEAST LIKELY to use in this situation? A) disability B) health C) life D) property Sylvia is LEAST LIKELY to use life insurance in this situation. Although whole life insurance has a cash value that can be used in emergencies, the other insurance policies are directly connected to the situation. 11) Which type of insurance pays an insured person an income when that person is unable to work because of accident or illness? A) Life Insurance B) Health Insurance C) Property Insurance D) Disability Insurance When a person is unable to work because of accident or illness, disability insurance pays an income based on the amount of contributions and type of disability insurance. 3/13

4 12) Term Life Insurance Whole Life Insurance Deferred Annuities Immediate Annuities Reason for buying Provide income for dependents Provide income for dependents To accummulate money in a taxdeferred product To assure people don't "outlive income" Pays out When A person dies A person dies, or borrows the cash value of the policy A person makes withdrawls One period after purchase, stops at death Forms of Payment Lifetime Income Accumulates Money Tax Deferred? Yes Yes Yes, but only in the early payout years Benefits taxable income when received? Yes, but only a portion Yes, but only a portion Keene has decided he would like to provide income for his dependents, but he wants flexibility in the pay out options. According to the chart, which choice BEST suits his needs? A) Deferred Annuities B) Term Life Insurance C) Immediate Annuities D) Whole Life Insurance Whole Life Insurance BEST suits Keene's needs because it provides income for dependents and allows borrowing the cash value of the insurance. 13) The first type of insurance high school students are likely to pay for themselves is A) life insurance. B) property insurance. C) automobile insurance. D) disability insurance. High school students are more likely to pay for automobile insurance first than any other type of insurance. 4/13

5 14) Term Life Insurance Whole Life Insurance Deferred Annuities Immediate Annuities Reason for buying Provide income for dependents Provide income for dependents To accummulate money in a taxdeferred product To assure people don't "outlive income" Pays out When A person dies A person dies, or borrows the cash value of the policy A person makes withdrawls One period after purchase, stops at death Forms of Payment Lifetime Income Accumulates Money Tax Deferred? Yes Yes Yes, but only in the early payout years Benefits taxable income when received? Yes, but only a portion Yes, but only a portion According to the chart, all of these are factors to consider when purchasing insurance and/or annuities EXCEPT A) pay out options. B) purpose for buying. C) age at purchase date. D) taxable contributions and pay outs. Although age at purchase date may be a factor, it is not listed on the chart, and is therefore the answer. 15) Health Maintenance Organizations (HMOs) are MOST LIKELY associated with which of these types of insurance? A) life insurance B) medical insurance C) property insurance D) disability insurance Health Maintenance Organizations, or HMOs, are MOST LIKELY associated with medical insurance plans. HMOs are a type of managed care health insurance plan. 16) Aiden is considering types of insurance to cover his newly-purchased home near a river. Aiden should MOST LIKELY research A) if his health insurance includes injuries due to construction. B) if his life insurance premiums will decrease due to owning a home. C) if his property insurance policy will include flood damage benefits. D) if his automobile insurance rates will increase at his new location. Aiden should MOST LIKELY research if his property insurance policy will include flood damage benefits. He is considering property insurance, not other types of insurance. 5/13

6 17) Term Life Insurance Whole Life Insurance Deferred Annuities Immediate Annuities Reason for buying Provide income for dependents Provide income for dependents To accummulate money in a taxdeferred product To assure people don't "outlive income" Pays out When A person dies A person dies, or borrows the cash value of the policy A person makes withdrawls One period after purchase, stops at death Forms of Payment Lifetime Income Accumulates Money Tax Deferred? Yes Yes Yes, but only in the early payout years Benefits taxable income when received? Yes, but only a portion Yes, but only a portion Malia has decided to set aside money. She prefers to pay the least amount in taxes. According to the chart, which option BEST suits her needs? A) Deferred Annuities B) Term Life Insurance C) Immediate Annuities D) Whole Life Insurance Although several choices accumulate money tax-deferred, only Whole Life Insurance also has no taxes at pay out and is therefore the BEST option. 18) According to the U.S. Census Bureau, 85% of Americans have health insurance. Which generalization might BEST account for why approximately 15% of the population is without health insurance? A) Lower-income families may be unable to afford private health insurance. B) Older Americans usualy decide they do not need or want health insurance. C) High-income families use most of the funds reserved for public health insurance programs. D) A greater percentage of the population in the northeast are less likely to need insurance. Lower-income families may be unable to afford private health insurance. That might BEST account for why approximately 15% of the population is without health insurance. 19) Investment in education, training, and skill development has been linked to A) declining job satisfaction. B) growing financial instability. C) increasing earnings for workers. D) decreasing political participation. Investment in education, training, and skill development has been linked to increasing earnings for workers. Many national studies along with the US Census point to a potential rise in lifetime earnings related to educational attainment. 6/13

7 20) Bob would like to increase his earnings. The option MOST LIKELY to increase his earnings potential in the long-term is to A) spend money to renew current training. B) take a similar position with a different company. C) spend money for additional training and education. D) laterally transfer to a different job within his company. Bob will MOST LIKELY increase his earnings potential in the long-term if he spends money for additional training and education. This might make his short-term finances difficult, but over time he will likely make much, much more money than if he had not gone to school. 21) What generalization about educational attainment and annual earnings can be made according to the graph? A) Investment in education can lead to higher annual earnings. B) Annual earnings remain constant for all educational degrees. C) A worker with some college earns more annually than a worker with an Associate's degree. D) Although a worker with a Professional degree earns more initially, the annual earnings decrease over time. If you note that the lines represent education and the vertical axis represents income, then the answer is clear: Investment in education can lead to higher annual earnings. 7/13

8 22) According to the graph, A) initially, all workers have relatively the same annual earnings. B) workers with some college have a higher annual income than workers with a high school diploma. C) workers with a high school diploma have a higher annual income than workers with advanced degrees. D) at retirement, workers with a Doctoral degree earn relatively more than workers with a Professional degree. According to the graph, workers with some college have a higher annual income than workers with a high school diploma. tice the last four lines and you'll see the differences in the incomes. 8/13

9 23) Based on the U.S. Census information in the graph, A) annual earnings are not impacted by educational attainment. B) educational attainment has an inverse relationship to annual earnings. C) all workers with higher educational attainment have higher annual earnings. D) annual earnings have a generally positive correlation with educational attainment. Based on the U.S. Census information in the graph, annual earnings have a generally positive correlation with educational attainment. tice that the less education one has, the lower the average income is ("negative correlation"). 9/13

10 24) Which statement about investment in education is BEST SUPPORTED using the graphs? A) More education leads to high demand, low supply. B) More education leads to low demand, high supply. C) The average annual wage decreases as the amount of education increases. D) The average annual wage increases as the amount of education decreases. Which statement about investment in education is BEST SUPPORTED using the graphs? Using just the information on the graphs, more education leads to high demand, low supply. 10/13

11 25) Help Wanted Established company seeking full-time residential house cleaner. We will train. Must be honest and dependable. Call (123) Suburban medical facility seeking surgeon. Board Certified required. $1,000 signing bonus for every year of experience, up to $15,000. Send resume to 123 Medical Drive, Suburbia, GA. Temporary lifeguard needed to fill summer holiday shifts at outdoor swimming pool. Must have CPR and lifeguard certification. Apply in person to Bridgefront, 123 Bridgefront, Anytown, GA. Aircraft manufacturer seeking engineers with advanced degree in physics and no less than 15 years experience. Many positions available. Send resume to 123 Aircraft Blvd., Anytown, GA. According to the passage, what generalization can be made? A) The house cleaner is a semi-skilled position, while the engineer is a professional position. B) The lifeguard is an unskilled position, while the surgeon is a skilled position. C) Both the house cleaner and lifeguard are semi-skilled positions. D) Both the engineer and surgeon are professional positions. According to the passage, it can be assumed that both the engineer and surgeon are professional positions. This can be deduced because each require a great degree of educational qualification. 26) The skills MOST LIKELY needed to be successful in the workplace A) depend on the type of job. B) are dependent on the worker. C) are measured by the U.S. Census. D) must be attained by higher-level education. he skills MOST LIKELY needed to be successful in the workplace depend on the type of job. Each occupation has its own set of skills, not necessarily dependent on the worker. 11/13

12 27) Help Wanted Ads Established company seeking full-time residential house cleaner. We will train. Must be honest and dependable. Call (123) Suburban medical facility seeking surgeon. Board Certified required. $1,000 signing bonus for every year of experience, up to $15,000. Send resume to 123 Medical Drive, Suburbia, GA. Temporary lifeguard needed to fill summer holiday shifts at outdoor swimming pool. Must have CPR and lifeguard certification. Apply in person to Bridgefront, 123 Bridgefront, Anytown, GA. Aircraft manufacturer seeking engineers with advanced degree in physics and no less than 15 years experience. Many positions available. Send resume to 123 Aircraft Blvd., Anytown, GA. According to the passage, which of the help-wanted positions is an example of unskilled labor? A) surgeon B) engineer C) lifeguard D) house cleaner According to the passage, house cleaneris an example of unskilled labor. It is the only position that does not specify some kind of qualification as a requisite to being hired. 28) The job that would MOST LIKELY require strong written communication skills is A) a mechanic. B) a secretary. C) a bank teller. D) a retail clerk. The job that would MOST LIKELY require strong written communication skills is a secretary. Secretaries (or "administrative assistants") have to take down messages, type reports, and relay information in a written format much more than the other occupations listed. 12/13

13 29) This graph shows the effects of higher education on employment rates and weekly earnings. According to the graph, workers with which level of education usually make more-than-average earnings? A) associate degree B) bachelor s degree C) high school diploma D) less than high school diploma According to this chart, the average weekly earnings in 2011 amounted to $797. Education levels such as associate degree, high school diploma, and less than high school diploma all rated lower than this average level. However, workers who entered the workforce with a bachelor s degree generally made about $1,053 per week, which is greater than the average. 30) What field or occupation would Janyce be best suited? A) Teacher B) Game Warden C) Football Coach D) Physical Therapist Janyce likes math, working with children, and talking with people. Teacher would be the best occupation for Janyce. Teachers usually like working with children, have a subject specialty, and enjoy talking to people. 13/13