Financial Literacy Unit 1 Test

What is financial security?

Being able to pay for the unexpected expenses.

What bad things can happen without an understanding of personal finance?

Living paycheck to paycheck, living a sup-par lifestyle, living in debt, and declaring bankruptcy.

What are assets?

Anything you can sell for money that has financial value.

What are assets that appreciate? (3)

Assets that increase in value over time, such as real estate, stocks, collectibles, etc.

What are assets that depreciate? (4)

Assets that decrease in value over time, such as auto, boats, appliances, stocks, etc.

What’s the liquidity of an asset?

The ability to easily convert your assets into cash without a loss in value.

List these assets from most to least liquid: collectables, stocks, bank account, real estate, auto.

Bank account, stocks, auto, collectables, real estate.

What are liabilities?

Debts or financial responsibilities you owe to someone else.

Define inflation.

Inflation is the amount that the prices of good and services rise over time.

What’s the CPI?

Consumer price index; an index kept by the government that measures inflation.

What is interest?

The price that is paid for the use of another person’s money.

Describe the ROR on an asset.

Rate of return; the increase in value of any financial investment.

What’s opportunity cost?

Possibilities that someone gives up when they make one financial decision over another.

What is money?

A medium used to facilitate the exchange of goods and services between people.

What 5 characteristics must a monetary system posses to be effective?

Must be:

1. Transportable

2. Divisible

3. Backed by a strong government

4. Hard to counterfeit

5. Durable