,TESTBANK for Personal Finance , 14th Edition E.
Thomas Garman
Notes
1- The file is chapter after chapter.
2- We have shown you 10 or five pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many new
editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
,Name: Class: Date:
Chapter 01: Understand Personal Finance
True / False
1. Financial literacy is knowledge of facts, concepts, principles, and technological tools that are fundamental to being
smart about money.
a. True
b. False
ANSWER: True
2. Being financially responsible is being knowledgeable about facts, concepts, principles, and technological tools that are
fundamental to being smart about money.
a. True
b. False
ANSWER: False
3. Personal finance involves how people spend, save, protect, and invest their financial resources.
a. True
b. False
ANSWER: True
4. Financial success is defined as having high wealth.
a. True
b. False
ANSWER: False
5. Financial security is defined as having a high income.
a. True
b. False
ANSWER: False
6. People who save and invest are much more likely to have funds for future consumption.
a. True
b. False
ANSWER: True
7. Standard of living refers to an individual's level of spending and consumption.
a. True
b. False
ANSWER: False
8. Standard of living is what individuals or groups aspire to attain, and level of living is the level of wealth, comfort,
materials goods, and necessities one is currently living with.
a. True
b. False
ANSWER: True
9. Financial security or wealth requires you to spend less than you earn.
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Chapter 01: Understand Personal Finance
a. True
b. False
ANSWER: True
10. A business cycle is a wavelike pattern of economic activity that includes an expansion, peak, contraction, and trough.
a. True
b. False
ANSWER: True
11. The expansion phase is the preferred stage of the economic cycle.
a. True
b. False
ANSWER: True
12. Since it is impossible to make precise forecasts about economic trends, we can ignore inflation and interest rates when
planning our finances.
a. True
b. False
ANSWER: False
13. The typical U.S. recession is marked by an average economic decline of 2 percent.
a. True
b. False
ANSWER: True
14. The gross domestic product broadly measures the nation’s economic health.
a. True
b. False
ANSWER: True
15. Procyclical economic indicators move in the same direction as the economy.
a. True
b. False
ANSWER: True
16. The index of leading economic indicators is a composite index reported monthly that suggests the future direction of
the U.S. economy.
a. True
b. False
ANSWER: True
17. The index of leading economic indicators averages eight components of growth from various segments of the
economy.
a. True
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,Name: Class: Date:
Chapter 01: Understand Personal Finance
b. False
ANSWER: False
18. Leading economic indicators are relied upon to measure the state of the economy at any point in time.
a. True
b. False
ANSWER: False
19. An example of inflation is an increase in the price of coffee, gasoline, or other commodities.
a. True
b. False
ANSWER: True
20. A steady rise in the general level of prices is called inflation.
a. True
b. False
ANSWER: True
21. Deflation is a period of declining prices.
a. True
b. False
ANSWER: True
22. Deflation occurs in an economy when there is an expansion in the money supply.
a. True
b. False
ANSWER: False
23. The amount of goods and services that one's income will buy is called purchasing power.
a. True
b. False
ANSWER: True
24. Retirees or others on fixed incomes suffer during times of moderate to high inflation.
a. True
b. False
ANSWER: True
25. NOMINAL INCOME is adjusted for inflation and thus reflects the actual purchasing power of one's income.
a. True
b. False
ANSWER: False
26. In times of high inflation, personal incomes generally keep up with the inflation rate.
a. True
Copyright Cengage Learning. Powered by Cognero. Page 3
,Name: Class: Date:
Chapter 01: Understand Personal Finance
b. False
ANSWER: False
27. The consumer price index is a broad measure of price changes in all goods and services purchased for consumption by
urban households.
a. True
b. False
ANSWER: True
28. When prices rise, the dollar's purchasing power declines by the same percentage.
a. True
b. False
ANSWER: False
29. The term interest refers to the price of money.
a. True
b. False
ANSWER: True
30. Interest rates on home mortgages and other loans tend to fall during high inflation.
a. True
b. False
ANSWER: False
31. All things considered, a saver who earns 4 percent interest on a savings account when the rate of inflation is 4 percent
is losing real purchasing power.
a. True
b. False
ANSWER: True
32. Smart investors recognize that inflation risk is higher for long-term lending than for short-term lending.
a. True
b. False
ANSWER: True
33. When forecasting long-term inflation rates for financial planning purposes, it is better to err on the low side rather than
on the high side.
a. True
b. False
ANSWER: False
34. Interest rates earned on short-term investments are generally lower than those earned on longer-term investments.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 4
,Name: Class: Date:
Chapter 01: Understand Personal Finance
35. The rate of interest and the inflation rate generally move in the same directions; when one goes up, the other also goes
up.
a. True
b. False
ANSWER: True
36. When one forgoes buying a new TV because they spend the money on college books, the TV is the opportunity cost of
buying the books.
a. True
b. False
ANSWER: True
37. By considering opportunity costs, we can optimize our financial decisions.
a. True
b. False
ANSWER: True
38. The opportunity cost of a decision is the value of the next best alternative that must be foregone and addresses the
personal consequences of choices.
a. True
b. False
ANSWER: True
39. Marginal cost is the additional cost of one more unit of something.
a. True
b. False
ANSWER: True
40. According to economic theory, people will seek additional utility if marginal utility exceeds marginal cost.
a. True
b. False
ANSWER: True
41. Most financially successful taxpayers must pay federal income taxes at the 22 percent marginal tax rate.
a. True
b. False
ANSWER: True
42. Financially successful people often pay U.S. federal income taxes at the 22 percent, or higher, marginal tax rate.
a. True
b. False
ANSWER: True
43. One's average federal income tax rate is generally equal to one's marginal tax rate.
Copyright Cengage Learning. Powered by Cognero. Page 5
,Name: Class: Date:
Chapter 01: Understand Personal Finance
a. True
b. False
ANSWER: False
44. Taxes on tax-sheltered income are avoided, whereas taxes on tax-exempt income are postponed.
a. True
b. False
ANSWER: False
45. Tax-exempt income has a greater tax advantage when compared to tax-sheltered income.
a. True
b. False
ANSWER: True
46. Simple interest is the interest computed on the principal only, without adding the interest to the principal to determine
future interest.
a. True
b. False
ANSWER: True
47. The simple-interest formula assumes that interest earned is withdrawn each year annually.
a. True
b. False
ANSWER: True
48. Compounding occurs when interest earned is added to the principal so that, from that moment on, the added interest
also earns interest.
a. True
b. False
ANSWER: True
49. Simple interest will produce larger investment values than compound interest.
a. True
b. False
ANSWER: False
50. Simple interest is based on time value of money considerations.
a. True
b. False
ANSWER: False
51. Earning interest on interest is the effect of compounding.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 6
,Name: Class: Date:
Chapter 01: Understand Personal Finance
52. Compounding is the basis for all time value of money considerations.
a. True
b. False
ANSWER: True
53. Future value is the valuation of an asset at some future date.
a. True
b. False
ANSWER: True
54. Present value is also known as direct value.
a. True
b. False
ANSWER: False
55. Present value is the current value of an asset (or stream of assets) of a future value (or stream of assets) to be received
on a future date.
a. True
b. False
ANSWER: True
56. The present value of an annuity is the future worth of a stream of payments to be received in the future.
a. True
b. False
ANSWER: False
57. Obsolete knowledge is what we believe may have been valid at one time.
a. True
b. False
ANSWER: True
58. Financial well-being is a state in which a person can feel secure in their financial future.
a. True
b. False
ANSWER: True
59. Capitalism defines the U.S. economy.
a. True
b. False
ANSWER: True
60. The sharing economy refers to P2P access to goods and services.
a. True
b. False
Copyright Cengage Learning. Powered by Cognero. Page 7
, Name: Class: Date:
Chapter 01: Understand Personal Finance
ANSWER: True
Multiple Choice
61. What aspect or aspects does the study of personal finance entail?
a. How people spend their financial resources
b. How people save their financial resources
c. How people invest their financial resources
d. All of these.
ANSWER: d
62. Drew and Alex are saving monthly to buy a home, but they are currently renting an apartment. What is the apartment
considered to be a part of?
a. Their standard of living
b. Their level of living
c. Their savings
d. Personal inflation rate
ANSWER: b
63. To achieve one's financial objectives, it is necessary to restrain from which of the following?
a. Current consumption
b. Savings
c. Investment
d. Future earnings
ANSWER: a
64. How is financial success defined?
a. As the achievement of a financially secure retirement
b. As the achievement of desired, planned, or attempted financial aspirations
c. As the achievement of vast wealth
d. As the achievement of a comfortable lifestyle
ANSWER: b
65. Which of the following should be the easiest for a person to forecast?
a. Interest rates
b. Inflation
c. Income
d. Economic growth
ANSWER: c
66. Which of the following is the preferred phase of the economic cycle?
a. Expansion
b. Peak
c. Trough
Copyright Cengage Learning. Powered by Cognero. Page 8
Thomas Garman
Notes
1- The file is chapter after chapter.
2- We have shown you 10 or five pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many new
editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
,Name: Class: Date:
Chapter 01: Understand Personal Finance
True / False
1. Financial literacy is knowledge of facts, concepts, principles, and technological tools that are fundamental to being
smart about money.
a. True
b. False
ANSWER: True
2. Being financially responsible is being knowledgeable about facts, concepts, principles, and technological tools that are
fundamental to being smart about money.
a. True
b. False
ANSWER: False
3. Personal finance involves how people spend, save, protect, and invest their financial resources.
a. True
b. False
ANSWER: True
4. Financial success is defined as having high wealth.
a. True
b. False
ANSWER: False
5. Financial security is defined as having a high income.
a. True
b. False
ANSWER: False
6. People who save and invest are much more likely to have funds for future consumption.
a. True
b. False
ANSWER: True
7. Standard of living refers to an individual's level of spending and consumption.
a. True
b. False
ANSWER: False
8. Standard of living is what individuals or groups aspire to attain, and level of living is the level of wealth, comfort,
materials goods, and necessities one is currently living with.
a. True
b. False
ANSWER: True
9. Financial security or wealth requires you to spend less than you earn.
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Chapter 01: Understand Personal Finance
a. True
b. False
ANSWER: True
10. A business cycle is a wavelike pattern of economic activity that includes an expansion, peak, contraction, and trough.
a. True
b. False
ANSWER: True
11. The expansion phase is the preferred stage of the economic cycle.
a. True
b. False
ANSWER: True
12. Since it is impossible to make precise forecasts about economic trends, we can ignore inflation and interest rates when
planning our finances.
a. True
b. False
ANSWER: False
13. The typical U.S. recession is marked by an average economic decline of 2 percent.
a. True
b. False
ANSWER: True
14. The gross domestic product broadly measures the nation’s economic health.
a. True
b. False
ANSWER: True
15. Procyclical economic indicators move in the same direction as the economy.
a. True
b. False
ANSWER: True
16. The index of leading economic indicators is a composite index reported monthly that suggests the future direction of
the U.S. economy.
a. True
b. False
ANSWER: True
17. The index of leading economic indicators averages eight components of growth from various segments of the
economy.
a. True
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Chapter 01: Understand Personal Finance
b. False
ANSWER: False
18. Leading economic indicators are relied upon to measure the state of the economy at any point in time.
a. True
b. False
ANSWER: False
19. An example of inflation is an increase in the price of coffee, gasoline, or other commodities.
a. True
b. False
ANSWER: True
20. A steady rise in the general level of prices is called inflation.
a. True
b. False
ANSWER: True
21. Deflation is a period of declining prices.
a. True
b. False
ANSWER: True
22. Deflation occurs in an economy when there is an expansion in the money supply.
a. True
b. False
ANSWER: False
23. The amount of goods and services that one's income will buy is called purchasing power.
a. True
b. False
ANSWER: True
24. Retirees or others on fixed incomes suffer during times of moderate to high inflation.
a. True
b. False
ANSWER: True
25. NOMINAL INCOME is adjusted for inflation and thus reflects the actual purchasing power of one's income.
a. True
b. False
ANSWER: False
26. In times of high inflation, personal incomes generally keep up with the inflation rate.
a. True
Copyright Cengage Learning. Powered by Cognero. Page 3
,Name: Class: Date:
Chapter 01: Understand Personal Finance
b. False
ANSWER: False
27. The consumer price index is a broad measure of price changes in all goods and services purchased for consumption by
urban households.
a. True
b. False
ANSWER: True
28. When prices rise, the dollar's purchasing power declines by the same percentage.
a. True
b. False
ANSWER: False
29. The term interest refers to the price of money.
a. True
b. False
ANSWER: True
30. Interest rates on home mortgages and other loans tend to fall during high inflation.
a. True
b. False
ANSWER: False
31. All things considered, a saver who earns 4 percent interest on a savings account when the rate of inflation is 4 percent
is losing real purchasing power.
a. True
b. False
ANSWER: True
32. Smart investors recognize that inflation risk is higher for long-term lending than for short-term lending.
a. True
b. False
ANSWER: True
33. When forecasting long-term inflation rates for financial planning purposes, it is better to err on the low side rather than
on the high side.
a. True
b. False
ANSWER: False
34. Interest rates earned on short-term investments are generally lower than those earned on longer-term investments.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 4
,Name: Class: Date:
Chapter 01: Understand Personal Finance
35. The rate of interest and the inflation rate generally move in the same directions; when one goes up, the other also goes
up.
a. True
b. False
ANSWER: True
36. When one forgoes buying a new TV because they spend the money on college books, the TV is the opportunity cost of
buying the books.
a. True
b. False
ANSWER: True
37. By considering opportunity costs, we can optimize our financial decisions.
a. True
b. False
ANSWER: True
38. The opportunity cost of a decision is the value of the next best alternative that must be foregone and addresses the
personal consequences of choices.
a. True
b. False
ANSWER: True
39. Marginal cost is the additional cost of one more unit of something.
a. True
b. False
ANSWER: True
40. According to economic theory, people will seek additional utility if marginal utility exceeds marginal cost.
a. True
b. False
ANSWER: True
41. Most financially successful taxpayers must pay federal income taxes at the 22 percent marginal tax rate.
a. True
b. False
ANSWER: True
42. Financially successful people often pay U.S. federal income taxes at the 22 percent, or higher, marginal tax rate.
a. True
b. False
ANSWER: True
43. One's average federal income tax rate is generally equal to one's marginal tax rate.
Copyright Cengage Learning. Powered by Cognero. Page 5
,Name: Class: Date:
Chapter 01: Understand Personal Finance
a. True
b. False
ANSWER: False
44. Taxes on tax-sheltered income are avoided, whereas taxes on tax-exempt income are postponed.
a. True
b. False
ANSWER: False
45. Tax-exempt income has a greater tax advantage when compared to tax-sheltered income.
a. True
b. False
ANSWER: True
46. Simple interest is the interest computed on the principal only, without adding the interest to the principal to determine
future interest.
a. True
b. False
ANSWER: True
47. The simple-interest formula assumes that interest earned is withdrawn each year annually.
a. True
b. False
ANSWER: True
48. Compounding occurs when interest earned is added to the principal so that, from that moment on, the added interest
also earns interest.
a. True
b. False
ANSWER: True
49. Simple interest will produce larger investment values than compound interest.
a. True
b. False
ANSWER: False
50. Simple interest is based on time value of money considerations.
a. True
b. False
ANSWER: False
51. Earning interest on interest is the effect of compounding.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 6
,Name: Class: Date:
Chapter 01: Understand Personal Finance
52. Compounding is the basis for all time value of money considerations.
a. True
b. False
ANSWER: True
53. Future value is the valuation of an asset at some future date.
a. True
b. False
ANSWER: True
54. Present value is also known as direct value.
a. True
b. False
ANSWER: False
55. Present value is the current value of an asset (or stream of assets) of a future value (or stream of assets) to be received
on a future date.
a. True
b. False
ANSWER: True
56. The present value of an annuity is the future worth of a stream of payments to be received in the future.
a. True
b. False
ANSWER: False
57. Obsolete knowledge is what we believe may have been valid at one time.
a. True
b. False
ANSWER: True
58. Financial well-being is a state in which a person can feel secure in their financial future.
a. True
b. False
ANSWER: True
59. Capitalism defines the U.S. economy.
a. True
b. False
ANSWER: True
60. The sharing economy refers to P2P access to goods and services.
a. True
b. False
Copyright Cengage Learning. Powered by Cognero. Page 7
, Name: Class: Date:
Chapter 01: Understand Personal Finance
ANSWER: True
Multiple Choice
61. What aspect or aspects does the study of personal finance entail?
a. How people spend their financial resources
b. How people save their financial resources
c. How people invest their financial resources
d. All of these.
ANSWER: d
62. Drew and Alex are saving monthly to buy a home, but they are currently renting an apartment. What is the apartment
considered to be a part of?
a. Their standard of living
b. Their level of living
c. Their savings
d. Personal inflation rate
ANSWER: b
63. To achieve one's financial objectives, it is necessary to restrain from which of the following?
a. Current consumption
b. Savings
c. Investment
d. Future earnings
ANSWER: a
64. How is financial success defined?
a. As the achievement of a financially secure retirement
b. As the achievement of desired, planned, or attempted financial aspirations
c. As the achievement of vast wealth
d. As the achievement of a comfortable lifestyle
ANSWER: b
65. Which of the following should be the easiest for a person to forecast?
a. Interest rates
b. Inflation
c. Income
d. Economic growth
ANSWER: c
66. Which of the following is the preferred phase of the economic cycle?
a. Expansion
b. Peak
c. Trough
Copyright Cengage Learning. Powered by Cognero. Page 8
