, TESTBANK FOR PFIN 8th Edition Billingsley
Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
We continuously update our files to ensure you receive the latest and most accurate
editions.
New editions are added regularly – stay connected for updates!
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Contact Email:
,Name: Class: Date:
Ch 01: Understanding the Financial Process
True / False
1. The average propensity to consume is commonly viewed as a key determinant of standard of living.
a. True
b. False
ANSWER: False
2. Financial planning can improve your standard of living.
a. True
b. False
ANSWER: True
3. Standard of living is defined as the necessities, comforts, and luxuries desired by an individual or a family.
a. True
b. False
ANSWER: True
4. The support of philanthropic organizations is a material item that contributes to our quality of life.
a. True
b. False
ANSWER: False
5. The most effective way to achieve financial objectives is through personal financial planning.
a. True
b. False
ANSWER: True
6. Two people with significantly different incomes can have equal average propensities to consume because of
differences in their standard of living.
a. True
b. False
ANSWER: True
7. Morgan has an annual income of $45,000 and spends $30,000 for current needs. Morgan’s average propensity to
consume is 80 percent.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Ch 01: Understanding the Financial Process
8. Tangible (physical) assets are earning assets that are held for the returns they promise.
a. True
b. False
ANSWER: False
9. It is easy to change your partner’s financial style, so there is no need for financial planning to resolve conflicts
regarding money matters.
a. True
b. False
ANSWER: False
10. The need for financial planning declines as your income increases.
a. True
b. False
ANSWER: False
11. When you get your first job, you should make a good financial plan that you can follow without making changes until
you retire.
a. True
b. False
ANSWER: False
12. Saving $400 for a large, flat-screen TV within the next four months is an example of a short-term goal.
a. True
b. False
ANSWER: True
13. Short-term planning should include creating and maintaining an emergency fund with at least six months’ worth of
income.
a. True
b. False
ANSWER: True
14. You should discuss your financial goals and attitudes toward money with your partner.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Ch 01: Understanding the Financial Process
15. For employees of large firms, managing employee benefits is an important part of financial planning.
a. True
b. False
ANSWER: True
16. Accumulating wealth for later years is called estate planning.
a. True
b. False
ANSWER: False
17. The longer you wait to begin retirement planning, the less you are likely to have in your retirement fund.
a. True
b. False
ANSWER: True
18. Tax plans are closely tied to investment plans.
a. True
b. False
ANSWER: True
19. Most people tend to be more liberal about their expenditures during a recession or crisis.
a. True
b. False
ANSWER: False
20. You should limit your spending to no more than 20 percent more than what you earn.
a. True
b. False
ANSWER: False
21. Commission-based financial planners charge fees based on the complexity of the plan they prepare.
a. True
b. False
ANSWER: False
22. Fee-only financial planners earn commissions for the products they sell.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 3
,Name: Class: Date:
Ch 01: Understanding the Financial Process
23. Retirement planning includes taking advantage of and managing employer-sponsored benefits.
a. True
b. False
ANSWER: True
24. Recessions and financial crises will always result in job loss.
a. True
b. False
ANSWER: False
25. Financial planning takes place in a dynamic economic environment created by the actions of the government,
business, and consumers.
a. True
b. False
ANSWER: True
26. Your purchase, saving, investment, and retirement plans and decisions are not influenced by the present state of the
economy.
a. True
b. False
ANSWER: False
27. The federal government delegates its regulation of economic activity function to businesses and consumers.
a. True
b. False
ANSWER: False
28. Living costs are constant throughout the country.
a. True
b. False
ANSWER: False
29. Geographic factors affect your earning power.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 4
,Name: Class: Date:
Ch 01: Understanding the Financial Process
30. Marital status affects the income level of individuals.
a. True
b. False
ANSWER: True
31. In the United States, salaries tend to be higher in the Northeast and West than in the South.
a. True
b. False
ANSWER: True
32. The decisions you make in career planning are independent of the decisions you make in financial planning.
a. True
b. False
ANSWER: False
33. Setting long- and short-term career goals helps in career planning.
a. True
b. False
ANSWER: True
34. Career plans should not be changed after long- and short-term career goals are set.
a. True
b. False
ANSWER: False
Multiple Choice
35. Personal financial planning is important because it:
a. controls inflation.
b. limits consumption.
c. reduces social disparity.
d. results in an improved standard of living.
e. reduces economic differences among individuals.
ANSWER: d
Copyright Cengage Learning. Powered by Cognero. Page 5
,Name: Class: Date:
Ch 01: Understanding the Financial Process
36. Financial planning helps us:
a. control inflation.
b. have flexibility to handle job loss.
c. control unemployment rates.
d. obtain a Social Security number.
e. decrease national debt.
ANSWER: b
37. The best way to achieve your financial objectives is to:
a. have a luxurious standard of living.
b. spend your money at once to reach your objectives swiftly.
c. develop a sound financial plan.
d. create a good tax deferment strategy.
e. monitor your spending.
ANSWER: c
38. An individual’s quality of life is closely tied to their:
a. political orientation.
b. charitable contributions.
c. pollution control efforts.
d. standard of living.
e. educational qualifications.
ANSWER: d
39. A key determinant of an individual’s quality of life is their:
a. tax bill.
b. financial goals.
c. wealth.
d. motivation.
e. growth potential.
ANSWER: c
40. What type of plans are most helpful in making decisions regarding retirement?
a. Personal financial
b. Insurance
c. Estate
d. Business
e. Spending
ANSWER: a
Copyright Cengage Learning. Powered by Cognero. Page 6
,Name: Class: Date:
Ch 01: Understanding the Financial Process
41. The average propensity to consume refers to:
a. the dollars of income spent on luxury goods.
b. the dollars of income saved by an individual.
c. expenditures on the basic necessities of life.
d. the percentage of income spent for current needs.
e. the fact that people with higher propensity to consume earn lower income.
ANSWER: d
42. Neha graduated with a master’s degree in personal financial planning. After working for two years in a small
financial planning firm, Neha earns $85,000 annually and saves $5,000 a year after spending on current needs. What
is Neha’s average propensity to consume?
a. 5 percent
b. 25 percent
c. 60 percent
d. 88 percent
e. 94 percent
ANSWER: e
43. Which of the following is a reason for a decrease in the average propensity to consume with an increase in income?
a. The amount of savings decreases, and the consumption of necessities increases.
b. The expenditure on luxury goods increases, and the amount of savings decreases.
c. The expenditure on luxury goods represents only a small portion of income.
d. The amount of savings represents only a small portion of income.
e. The cost of necessities represents only a small portion of income.
ANSWER: e
44. What is the term for the net total value of all the items that an individual owns?
a. Wealth
b. Propensity to consume
c. The consumer price index (CPI)
d. Purchasing power
e. Credit debt
ANSWER: a
Copyright Cengage Learning. Powered by Cognero. Page 7
, Name: Class: Date:
Ch 01: Understanding the Financial Process
45. Stocks, bonds, and mutual funds are considered what type of assets?
a. Physical
b. Earning
c. Fixed
d. Tangible
e. Real
ANSWER: b
46. The purchase of a car is an example of:
a. consuming.
b. investing.
c. saving.
d. deferring.
e. distributing.
ANSWER: a
47. An example of the purchase of a financial asset would be the purchase of
a. a painting.
b. stocks.
c. a car.
d. jewelry.
e. a vacation home.
ANSWER: b
48. A trend with a profound effect on people’s standard of living and that requires greater responsibility to manage
money wisely is the:
a. single-income family.
b. two-income family.
c. investment family.
d. retirement-income family.
e. government.
ANSWER: b
Copyright Cengage Learning. Powered by Cognero. Page 8
Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
We continuously update our files to ensure you receive the latest and most accurate
editions.
New editions are added regularly – stay connected for updates!
✅ Why Buy From Us?
📚 Complete & organized chapter-by-chapter – no missing content, no guessing.
⚡ Instant digital delivery – get your file the moment you pay, no waiting.
📅 Always up to date – we track new editions so you always get the latest version.
💬 Friendly support – real humans ready to help, anytime you need us.
🔒 Safe & secure – thousands of satisfied students trust us every semester.
🛡️Our Guarantees
💰 Money-Back Guarantee: Not satisfied? We offer a full refund – no questions asked.
🔄 Wrong File? No Problem: Contact us and we will replace it immediately with the
correct version, free of charge.
⏰ 24/7 Support: We are always here – reach out anytime and expect a fast response.
Contact Email:
,Name: Class: Date:
Ch 01: Understanding the Financial Process
True / False
1. The average propensity to consume is commonly viewed as a key determinant of standard of living.
a. True
b. False
ANSWER: False
2. Financial planning can improve your standard of living.
a. True
b. False
ANSWER: True
3. Standard of living is defined as the necessities, comforts, and luxuries desired by an individual or a family.
a. True
b. False
ANSWER: True
4. The support of philanthropic organizations is a material item that contributes to our quality of life.
a. True
b. False
ANSWER: False
5. The most effective way to achieve financial objectives is through personal financial planning.
a. True
b. False
ANSWER: True
6. Two people with significantly different incomes can have equal average propensities to consume because of
differences in their standard of living.
a. True
b. False
ANSWER: True
7. Morgan has an annual income of $45,000 and spends $30,000 for current needs. Morgan’s average propensity to
consume is 80 percent.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Ch 01: Understanding the Financial Process
8. Tangible (physical) assets are earning assets that are held for the returns they promise.
a. True
b. False
ANSWER: False
9. It is easy to change your partner’s financial style, so there is no need for financial planning to resolve conflicts
regarding money matters.
a. True
b. False
ANSWER: False
10. The need for financial planning declines as your income increases.
a. True
b. False
ANSWER: False
11. When you get your first job, you should make a good financial plan that you can follow without making changes until
you retire.
a. True
b. False
ANSWER: False
12. Saving $400 for a large, flat-screen TV within the next four months is an example of a short-term goal.
a. True
b. False
ANSWER: True
13. Short-term planning should include creating and maintaining an emergency fund with at least six months’ worth of
income.
a. True
b. False
ANSWER: True
14. You should discuss your financial goals and attitudes toward money with your partner.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Ch 01: Understanding the Financial Process
15. For employees of large firms, managing employee benefits is an important part of financial planning.
a. True
b. False
ANSWER: True
16. Accumulating wealth for later years is called estate planning.
a. True
b. False
ANSWER: False
17. The longer you wait to begin retirement planning, the less you are likely to have in your retirement fund.
a. True
b. False
ANSWER: True
18. Tax plans are closely tied to investment plans.
a. True
b. False
ANSWER: True
19. Most people tend to be more liberal about their expenditures during a recession or crisis.
a. True
b. False
ANSWER: False
20. You should limit your spending to no more than 20 percent more than what you earn.
a. True
b. False
ANSWER: False
21. Commission-based financial planners charge fees based on the complexity of the plan they prepare.
a. True
b. False
ANSWER: False
22. Fee-only financial planners earn commissions for the products they sell.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 3
,Name: Class: Date:
Ch 01: Understanding the Financial Process
23. Retirement planning includes taking advantage of and managing employer-sponsored benefits.
a. True
b. False
ANSWER: True
24. Recessions and financial crises will always result in job loss.
a. True
b. False
ANSWER: False
25. Financial planning takes place in a dynamic economic environment created by the actions of the government,
business, and consumers.
a. True
b. False
ANSWER: True
26. Your purchase, saving, investment, and retirement plans and decisions are not influenced by the present state of the
economy.
a. True
b. False
ANSWER: False
27. The federal government delegates its regulation of economic activity function to businesses and consumers.
a. True
b. False
ANSWER: False
28. Living costs are constant throughout the country.
a. True
b. False
ANSWER: False
29. Geographic factors affect your earning power.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 4
,Name: Class: Date:
Ch 01: Understanding the Financial Process
30. Marital status affects the income level of individuals.
a. True
b. False
ANSWER: True
31. In the United States, salaries tend to be higher in the Northeast and West than in the South.
a. True
b. False
ANSWER: True
32. The decisions you make in career planning are independent of the decisions you make in financial planning.
a. True
b. False
ANSWER: False
33. Setting long- and short-term career goals helps in career planning.
a. True
b. False
ANSWER: True
34. Career plans should not be changed after long- and short-term career goals are set.
a. True
b. False
ANSWER: False
Multiple Choice
35. Personal financial planning is important because it:
a. controls inflation.
b. limits consumption.
c. reduces social disparity.
d. results in an improved standard of living.
e. reduces economic differences among individuals.
ANSWER: d
Copyright Cengage Learning. Powered by Cognero. Page 5
,Name: Class: Date:
Ch 01: Understanding the Financial Process
36. Financial planning helps us:
a. control inflation.
b. have flexibility to handle job loss.
c. control unemployment rates.
d. obtain a Social Security number.
e. decrease national debt.
ANSWER: b
37. The best way to achieve your financial objectives is to:
a. have a luxurious standard of living.
b. spend your money at once to reach your objectives swiftly.
c. develop a sound financial plan.
d. create a good tax deferment strategy.
e. monitor your spending.
ANSWER: c
38. An individual’s quality of life is closely tied to their:
a. political orientation.
b. charitable contributions.
c. pollution control efforts.
d. standard of living.
e. educational qualifications.
ANSWER: d
39. A key determinant of an individual’s quality of life is their:
a. tax bill.
b. financial goals.
c. wealth.
d. motivation.
e. growth potential.
ANSWER: c
40. What type of plans are most helpful in making decisions regarding retirement?
a. Personal financial
b. Insurance
c. Estate
d. Business
e. Spending
ANSWER: a
Copyright Cengage Learning. Powered by Cognero. Page 6
,Name: Class: Date:
Ch 01: Understanding the Financial Process
41. The average propensity to consume refers to:
a. the dollars of income spent on luxury goods.
b. the dollars of income saved by an individual.
c. expenditures on the basic necessities of life.
d. the percentage of income spent for current needs.
e. the fact that people with higher propensity to consume earn lower income.
ANSWER: d
42. Neha graduated with a master’s degree in personal financial planning. After working for two years in a small
financial planning firm, Neha earns $85,000 annually and saves $5,000 a year after spending on current needs. What
is Neha’s average propensity to consume?
a. 5 percent
b. 25 percent
c. 60 percent
d. 88 percent
e. 94 percent
ANSWER: e
43. Which of the following is a reason for a decrease in the average propensity to consume with an increase in income?
a. The amount of savings decreases, and the consumption of necessities increases.
b. The expenditure on luxury goods increases, and the amount of savings decreases.
c. The expenditure on luxury goods represents only a small portion of income.
d. The amount of savings represents only a small portion of income.
e. The cost of necessities represents only a small portion of income.
ANSWER: e
44. What is the term for the net total value of all the items that an individual owns?
a. Wealth
b. Propensity to consume
c. The consumer price index (CPI)
d. Purchasing power
e. Credit debt
ANSWER: a
Copyright Cengage Learning. Powered by Cognero. Page 7
, Name: Class: Date:
Ch 01: Understanding the Financial Process
45. Stocks, bonds, and mutual funds are considered what type of assets?
a. Physical
b. Earning
c. Fixed
d. Tangible
e. Real
ANSWER: b
46. The purchase of a car is an example of:
a. consuming.
b. investing.
c. saving.
d. deferring.
e. distributing.
ANSWER: a
47. An example of the purchase of a financial asset would be the purchase of
a. a painting.
b. stocks.
c. a car.
d. jewelry.
e. a vacation home.
ANSWER: b
48. A trend with a profound effect on people’s standard of living and that requires greater responsibility to manage
money wisely is the:
a. single-income family.
b. two-income family.
c. investment family.
d. retirement-income family.
e. government.
ANSWER: b
Copyright Cengage Learning. Powered by Cognero. Page 8
