inancial Literacy Final Exam
interest rate - Answer percentage paid to a lender for the use of borrowed money
emergency fund - Answer 6 - 9 months of expenses in readily available cash to be used
only in the event of an emergency; Baby Step 3
pre-authorized checking - Answer PAC; system of automatic payment processing by
which bills, deposits, and payments are handled electronically and at regular intervals or
on a pre-determined schedule
sinking fund - Answer saving money for a specific purpose to allow interest to work for
you rather than against you
compound interest - Answer interest paid on interest previously earned; credited daily,
monthly, quarterly, semi-annually, or annually on both principal and previously credited
interest
saving - Answer the process of setting aside money until a future date instead of
spending it today. The goal is to provide for emergencies, short term goals, and
investments.
want - Answer desire for economic goods or services not necessary in order to survive
need - Answer economic goods and services that are basic for living such as food,
clothing, shelter
deposit - Answer putting money into the account
withdrawal - Answer taking money out of the account
rule of 72 - Answer a quick way to calculate a sum of money; how long it will take to
double your money
simple interest - Answer interest credited daily, monthly, quarterly, semi-annually, or
annually on principal only, not previously credited interest
salary - Answer payment for work, usually calculated in periods of a week or longer;
usually tied to the completion of specific duties over a minimum, but not maximum,
number of hours
wage - Answer payment for work, usually calculated in periods of an hour rather than
longer
minimum wage - Answer the minimum payment a worker can receive
, overtime - Answer time and a half
progressive tax - Answer the more money you make, the more tax you pay; the
percentage also increases
flat tax - Answer sales tax; same for everyone regardless of pay
federal tax - Answer progressive tax paid to the federal government on earned and
unearned income
social security - Answer federal government program of transfer payments for
retirement, disability, or the loss of income from a parent or guardian; funds come from
a tax on income, which is a payroll deduction labeled FICA
medicare - Answer federal government program that pays for certain healthcare
expenses for citizens 65 or older; managed by the Social Security Adminstration
gross pay - Answer person's total income before withholdings and deductions
net pay - Answer remaining amount of an employee's gross pay after deductions such
as taxes and retirement contributions are made
commission - Answer a fee paid for providing a service
tip - Answer a gift of money, often a percentage of the total bill, to a person performing a
service; subject to federal income taxes; may be subject to state taxes as well
benefits - Answer forms of pay other than salary or wages (paid vacation, holiday pay,
stock options, health care coverage, reimbursement for education, cafeteria plan, etc.)
earned income - Answer payment received for work, such as wages, salaries,
commissions, and tips
unearned income - Answer money received for which no exchange was made, such as
a gift
taxable income - Answer income subject to tax, total income adjusted to deductions,
exemptions and credits
deductions - Answer an amount subtracted from something especially as an allowance
against tax
FICA - Answer Federal Insurance Contributions Act; government legislations that funds
Social Security
interest rate - Answer percentage paid to a lender for the use of borrowed money
emergency fund - Answer 6 - 9 months of expenses in readily available cash to be used
only in the event of an emergency; Baby Step 3
pre-authorized checking - Answer PAC; system of automatic payment processing by
which bills, deposits, and payments are handled electronically and at regular intervals or
on a pre-determined schedule
sinking fund - Answer saving money for a specific purpose to allow interest to work for
you rather than against you
compound interest - Answer interest paid on interest previously earned; credited daily,
monthly, quarterly, semi-annually, or annually on both principal and previously credited
interest
saving - Answer the process of setting aside money until a future date instead of
spending it today. The goal is to provide for emergencies, short term goals, and
investments.
want - Answer desire for economic goods or services not necessary in order to survive
need - Answer economic goods and services that are basic for living such as food,
clothing, shelter
deposit - Answer putting money into the account
withdrawal - Answer taking money out of the account
rule of 72 - Answer a quick way to calculate a sum of money; how long it will take to
double your money
simple interest - Answer interest credited daily, monthly, quarterly, semi-annually, or
annually on principal only, not previously credited interest
salary - Answer payment for work, usually calculated in periods of a week or longer;
usually tied to the completion of specific duties over a minimum, but not maximum,
number of hours
wage - Answer payment for work, usually calculated in periods of an hour rather than
longer
minimum wage - Answer the minimum payment a worker can receive
, overtime - Answer time and a half
progressive tax - Answer the more money you make, the more tax you pay; the
percentage also increases
flat tax - Answer sales tax; same for everyone regardless of pay
federal tax - Answer progressive tax paid to the federal government on earned and
unearned income
social security - Answer federal government program of transfer payments for
retirement, disability, or the loss of income from a parent or guardian; funds come from
a tax on income, which is a payroll deduction labeled FICA
medicare - Answer federal government program that pays for certain healthcare
expenses for citizens 65 or older; managed by the Social Security Adminstration
gross pay - Answer person's total income before withholdings and deductions
net pay - Answer remaining amount of an employee's gross pay after deductions such
as taxes and retirement contributions are made
commission - Answer a fee paid for providing a service
tip - Answer a gift of money, often a percentage of the total bill, to a person performing a
service; subject to federal income taxes; may be subject to state taxes as well
benefits - Answer forms of pay other than salary or wages (paid vacation, holiday pay,
stock options, health care coverage, reimbursement for education, cafeteria plan, etc.)
earned income - Answer payment received for work, such as wages, salaries,
commissions, and tips
unearned income - Answer money received for which no exchange was made, such as
a gift
taxable income - Answer income subject to tax, total income adjusted to deductions,
exemptions and credits
deductions - Answer an amount subtracted from something especially as an allowance
against tax
FICA - Answer Federal Insurance Contributions Act; government legislations that funds
Social Security
