Financial Literacy Final Post-Test

Online Summer Financial Literacy Final Post-Test Study Guide

What are traditional economic systems characterized by?

They are mainly family, tribe, or community centered, producing enough goods to satisfy the needs of community members using established production methods.

What defines command economic systems?

A centralized government makes most, if not all, economic decisions regarding production, methods, and distribution of goods and services.

How do market economic systems operate?

Individuals or consumers make economic decisions, determining what goods or services to produce, how to produce them, and at what price, without government intervention.

What are mixed economic systems?

They combine elements of traditional, command, and market economies, allowing for private ownership but with government regulation.

What does the U.S. free enterprise system entail?

It involves little to no government intervention in the economy.

What does the Law of Demand state?

As prices rise, consumer demand decreases, meaning fewer consumers will buy a product at higher prices.

What is the Law of Supply?

When the price of a good rises, the quantity supplied also rises, and when the price falls, the quantity supplied falls, indicating a direct relationship.

What happens in the market when prices are high?

There is excess supply in the market.

What occurs in the market when prices are low?

There is excess demand in the market.

What are the phases of the business cycle in order?

Prosperity (or expansion), recession, depression, and recovery.

What is direct marketing?

It is a strategy used by companies to inform target audiences about a product or service through direct communication methods.

What is a target audience?

A group of consumers that a company believes are more likely to buy a product or service because it satisfies their needs or wants.

What methods are included in direct marketing?

Email, letters, telephone calls, and newsletters.

What is public relations (PR) in marketing?

It involves using third parties, such as journalists, to convey positive information about a company or product.

What are some tools used in public relations?

Press releases, news articles, press conferences, and community relations.

What are sales promotions?

Strategies used to convince consumers to buy products and services immediately, generating interest and increasing brand recognition.

What are the goals of personal selling?

To highlight product features and benefits, inform customers how the product meets their needs, and answer questions.

What are the 4Ps of marketing?

Product, Place, Promotion, and Price.

What do depository institutions do?

They accept and manage customer deposits in accounts like checking and savings.

What is the role of investment institutions?

They help governments and businesses raise money from capital markets by issuing securities such as stocks and bonds.

What do contractual institutions deal with?

Insurance policies and pension funds, providing financial protection and retirement investment plans.

How do insurance policies provide financial protection?

They offer coverage for emergencies, such as medical situations.

What is a pension fund?

An investment plan for retirement where pooled money from individuals is invested in stocks and bonds.

What services do commercial banks offer?

Commercial banks offer checking accounts, savings accounts, check writing, ATM transactions, debit and credit cards, automatic payments, and money transfers.

What type of customers do financial service companies typically offer loans to?

Financial service companies offer loans to high

How do financial service companies typically finance consumer purchases?

They partner with businesses, such as car dealerships, to finance consumer purchases and charge higher interest rates compared to banks and credit unions.

What is a credit union?

A credit union provides financial services to its members, who are its collective owners, and generally charges lower fees than traditional banks.

How do credit unions utilize member deposits?

Credit unions use money from member deposits to provide loans to other members.

What are mortgages?

Mortgages are loans given to individuals or businesses to purchase property.

How do mortgage loan companies differ from commercial banks?

Mortgage loan companies often offer competitive lending rates and can approve loans quicker than commercial banks.

What types of insurance do insurance companies provide?

Insurance companies provide auto, home, and life insurance coverage.

What is the role of asset management firms?

Asset management firms invest client funds into a variety of investments and may manage clients' pension or retirement funds.

What are securities?

Securities are financial assets such as stocks and bonds that are traded on stock markets.

How do brokerage firms operate?

Brokerage firms trade securities for clients and facilitate transactions between buyers and sellers.

What is the legal responsibility of a trust company?

A trust company has a legal responsibility to manage a client's assets in the client's best interests.

What is the role of financial regulators?

Financial regulators oversee financial institutions and ensure compliance with laws and regulations.

What does the BAPCPA protect?

The BAPCPA protects retirement plans in the event of bankruptcy filings, ensuring that IRAs and other retirement plans are considered protected assets.

What is the purpose of the Community Reinvestment Act (CRA)?

The CRA encourages depository institutions to meet the credit needs of the communities they serve, especially in low

What was the Dodd

Frank Act designed to address?

What new agencies were created by the Dodd

Frank Act?

What does the Fair and Accurate Credit Transactions Act (FACTA) combat?

FACTA combats identity theft and facilitates the dispute of inaccurate information on credit reports.

What is a fraud alert?

A fraud alert is a notice that can be placed on a credit report by anyone who believes their identity has been stolen, making it harder for criminals to open credit in the victim's name.

What does the Equal Credit Opportunity Act (ECOA) prohibit?

The ECOA prohibits discrimination against borrowers based on race, religion, sex, national origin, marital status, age, or public assistance.

What factors should be used to determine an individual's creditworthiness?

Credit history and current debt.

Can individuals be denied credit due to their marital status?

No, individuals can be denied credit because of a low credit score, not because they are married.

What significant change did the Federal Deposit Insurance Act of 1950 introduce?

It gave the FDIC the power to lend money to any insured bank that was in danger of failure.

What is one stipulation for banks to receive loans from the FDIC?

The bank must be considered essential to the local community.

What does the Gramm

Leach

What is the purpose of the Right to Financial Privacy Act (RFPA)?

It sets guidelines for how the federal government can obtain a customer's financial records from their financial institution.

What must the government obtain to access a customer's financial records under the RFPA?

A subpoena or court order.

What was the main reason for the passage of the Sarbanes

Oxley Act in 2002?

What is one requirement imposed by the Sarbanes

Oxley Act on a company's senior officers?

What is the goal of the Sarbanes

Oxley Act?

What does Title X of the Dodd

Frank Act create?

What is the role of the Bureau of Consumer Financial Protection?

To supervise financial firms and enforce laws against deceptive business practices.

How does the Dodd

Frank Act protect consumers regarding transaction fees?

What does Title XIV of the Dodd

Frank Act aim to prevent?

What does the Dodd

Frank Act address regarding unfair lending practices?

What is the role of personal financial advisors?

To help individuals and families manage and grow their money.

What types of investments do personal financial advisors advise clients on?

Stocks, bonds, and other types of securities.

What is an important task for a personal financial advisor?

To educate clients about different types of investments and their potential risks and returns.

What does the Sarbanes

Oxley Act add to corporate governance?

What is the significance of the privacy notice required by the Gramm

Leach

What is one effect of the Dodd

Frank Act on mortgage availability?

What is 'steering' in the context of lending practices?

Charging some individuals high fees while others are charged less.

What is the overall aim of consumer protection laws like those established by the Dodd

Frank Act?

What are the short

term goals that personal financial advisors help clients with?

What long

term goal do personal financial advisors assist clients in planning for?

What educational background is required to become a personal financial advisor?

A bachelor's degree in finance, economics, accounting, financial planning, or business.

Which exam must all financial advisors pass to sell stocks and bonds?

The Series 7 exam.

What does a Series 6 certificate allow a financial advisor to sell?

Mutual funds, trusts, and variable annuities.

What is required to sell commodities as a financial advisor?

A Series 3 certificate.

What does a Series 65 certification combine?

Other series certifications.

What is the purpose of the Series 63 license?

It is the Uniform Securities Agent State license.

What certifications enhance a financial advisor's credibility and expertise?

Certified Financial Planner (CFP) and Chartered Financial Analyst (CFA) certificates.

What do tax accountants manage for their clients?

Their clients' taxes.

What ethical standards should tax accountants be well

versed in?

What is the role of tax accountants at the senior level?

They handle tax planning for large businesses and wealthy individuals.

What organization sets rules and standards for public accountants?

American Institute of Certified Public Accountants.

What is required to become a personal financial advisor?

A bachelor's degree and passing a series of exams.

What type of insurance do insurance sales agents sell?

Different types of insurance to mitigate risk of loss.

What does property and casualty insurance cover?

Financial loss from automobile accidents, fire, theft, and business liabilities.

What is the purpose of a life insurance policy?

To provide financial security for families by paying the beneficiary upon the policyholder's death.

What is the minimum education requirement to become an insurance sales agent?

At least a high school diploma.

What is typically required to obtain a state license for insurance agents?

Completion of a prelicensing course and passing a test for each insurance product.

What role do real estate brokers play in property transactions?

They act as intermediaries between property buyers and sellers.

What services do real estate brokers provide to clients?

They help clients buy, sell, and rent properties, and advise on home ownership and market conditions.

What must financial advisors adhere to in their practice?

The rules of the National Association of Personal Financial Advisors.

What are the primary duties of a real estate broker?

Preparing a list of properties for sale and taking prospective buyers or renters to see the properties, as well as presenting purchase offers from buyers to sellers.

What is required to become a licensed real estate broker?

A high school diploma, completion of a prelicensing course, passing the licensing exam, and renewing the license every two to four years.

What is a certified realtor?

A member of the National Association of Realtors who agrees to adhere to a strict code of ethics.

What is the role of a stockbroker?

A professional who buys and sells shares of stock for clients, conducting transactions on behalf of individuals and organizations.

What educational background is preferred for stockbrokers?

A bachelor's degree, preferably in finance.

What exams must stockbrokers pass to trade stocks?

They must pass a series of exams, including the Series 7 exam.

What do loan officers do?

They assist borrowers with the loan application process, help choose loans based on individual situations, and guide clients through applying for mortgage loans.

What is the typical educational requirement for loan officers?

A bachelor's degree in business is common, but not always required.

What must mortgage loan officers do to prepare loans?

They must obtain a license, pass a licensing exam, and undergo a background check, including a credit check.

What is the role of credit counselors?

They help clients develop plans to pay back debt, improve credit scores, and may negotiate lower interest rates with credit card companies.

What educational background is beneficial for credit counselors?

A high school diploma is required, and a bachelor's degree in finance is especially helpful.

What training may be required for credit counselors?

Some states may require training in debt management and passing a certification exam.