W!SE Practice Questions 1
Terms in this set (15)
What does the Federal Reserve use to regulate the nation's money supply?
Reason: The Federal Reserve uses monetary policy to regulate the nation's money supply. Monetary policy is directed at expanding or contracting the supply of money and credit in the U.S. economy. In theory, if there is too little money in circulation, consumers will spend less, interest rates will be high, and unemployment will rise. In this situation, the Fed can deliberately increase the amount of money in circulation, leading to lower interest rates, increases in consumer spending, and higher employment rates. If there is too much money in circulation, however, prices rise and the value of the dollar decreases (inflation).
A type of electronic funds transfer (EFT) is?
An ATM transaction
Reason: According to the Electronic Funds Transfer Act, Electronic funds transfers (EFTs) are any transfers of funds, other than a transaction originated by check, draft, or other paper instrument, initiated through electronic terminal, telephone, or computer, to authorize a financial institution to debit or credit an account. EFT's can be used to carry out many financial transactions, for example, to pay utility bills, make installment loan payments, and transfer funds from a savings account to a checking account or vice versa.
Identify the background color of a U.S. $5.00 bill.
Reason: The background color of all United States paper currency (bills) is green.
Which statement best describes the relationship between a person's educational level and that person's potential earning power?
A person with a professional degree is likely to earn at least four times as much per year as a person who did not complete high school
Reason: There is a direct relationship between educational level and potential earning power. A person with a professional degree, for example, is likely to earn at least four times as much per year as a person who never completed high school.
New coins and currency make their way into the general economy, consumers and businesses, through the distribution system of the:
Federal Reserve System
Reason: The U.S. Federal Mint , which is an operating bureau of the Department of the Treasury, makes new coins. The U.S. Bureau of Engraving and Printing prints new currency. The coins and currency are sent to the Federal Reserve Banks, which distribute it as needed. Most new coins and currency replace damaged or worn out coins and currency being taken out of circulation.
A high school student has begun to investigate the field of finance as a career choice. In deciding about the field, the student should focus on which question first?
Will I find a balance between financial rewards and personal satisfaction from work?
Reason: It is important to investigate a career with the idea of not only getting a sense of earning potential, types of positions available and the training necessary to acquire these positions but what are the chances that the individual will enjoy working in this field.
Nora needed to make a long-distance call from a pay phone and did not have the cash. She was able to make the call by using her:
Reason: Consumers purchase cash cards for a specific amount of money. The amount paid is stored in the card's memory, and the card can be used to pay for goods or services specific to a particular store or action until the amount stored, or "loaded" on the card, has been spent. The type of cash card Nora used is called a phone card. Some retail chain stores sell cash cards which can be used to pay for their products. Cash cards are either disposable or re-loadable. Disposable cash cards cannot be replenished (loaded again). With re-loadable cash cards, the consumer can return to the merchant and pay to have the balance on the card replenished.
When money is not used and goods and services are exchanged for other goods and services, this system is called:
Reason: Bartering means exchanging goods and services with another person and makes it possible to satisfy needs and wants without spending money. Bartering cannot be used for many transactions including the purchase of investments or insurance.
The common name for U.S. currency is:
Reason: The background color of all United States currency (bills) is primarily green.
Jami lost her debit card. She did not report it missing for 3 months. If an unauthorized person used her debit card, her maximum liability is:
Reason: According to the Electronic Fund Transfer Act, if a consumer reports the theft or loss of an ATM or debit card to the issuing financial institution within two business days, he/she is liable for not more than $50 of unauthorized purchases. If reported within 60 days, the consumer is liable for up to $500 of unauthorized purchases. If reported after 60 days or not reported, the consumer may be liable for the entire amount of unauthorized purchases.
Scott just got an ATM card to use and must choose a PIN (Personal Identification Number). How should he select a PIN that will give him maximum protection against anyone else being able to find out what the PIN is?
Use a random selection of letters and numbers
Reason: A PIN (personal identification number) is a secret code that protects the privacy of your accounts and allows only you to access them. The numbers should not be composed of numbers easily associated with the person choosing the PIN such as birth date, telephone number, or street number address. It should be a random series of numbers and letters that would be hard for unauthorized users to guess. Also, never write your PIN on your ATM or debit card or in your check book because then a thief would you?re your confidential information needed to make purchases or withdraw all the money out of your account.
Susan gives Marie her ABC Credit Union debit card and personal identification number (PIN) so Marie could get $25 from Susan's bank account. Marie withdrew $100 instead of the agreed to $25. How can Susan get the $75 back?
No bank or government agency is obligated to reimburse Susan because she authorized Marie to use her ATM card and PIN
Reason: The fact that Susan voluntarily gave Marie her EFT card and PIN means that Marie's withdrawal is considered an authorized transaction under the Electronic Fund Transfer Act. Thus, no financial institution or government agency is obligated to reimburse Susan or force Marie to give back the extra money. Susan's only recourse is to try to get Marie to give back the extra $75 or sue Marie for the money in the small claims court
Which of the following is a disadvantage of using phone cards, debit cards, electronic transfers, and ATM cards?
They expose consumers to greater likelihood of identity theft
Reason: The growing number of transactions that can be carried out without cash increases convenience for consumers who have credit cards, phone cards, debit cards, etc., but also exposes consumers to greater likelihood of fraud and/or identity theft.
Which of the following statements is usually true about individuals who are financially literate?
They understand the basics of personal finance and money management
Reason: Financial literacy is knowledge of facts, concepts, and technological tools that are basic to being smart about money. People who are not financially literate are more likely to fall prey to consumer scams, have excessive consumer debt, and spend their money without a spending plan. Ultimately, they may end up in serious financial trouble
The denominations of coins in the United States are:
$.01, $.05, $.10, $.25, $.50, and $1.00
Reason: The denominations of coins in the United States are $.01 (penny), $.05 (nickel), $.10 (dime), $.25 (quarter), $.50 (half-dollar) and $1.00 (dollar). Higher denominations of legal tender are in paper currency. At times, the US Mint does issue special coins of additional denominations.