exam1

Question 1

what are the 3 credit agency bureau’s?

transunion, experian, and equifax

Question 2

credit bureaus are not immune from cyber-attacks. Which bureau was hacked in 2017, releasing the personal information of consumers?

Answer 2

experian

Question 3

what are the 2 main methods of calculating the minimum credit card payment?

Answer 3

percent of balance and percent of balance + finance charge

Question 4

under the percent of balance method, if you have $1000.00 balance on your card and a minimum percent of 2% of the balance, your minimum payment would be?

Answer 4

$20.00

Question 5

why might you consider ‘‘freezing your credit’’ through a credit bureau?

Answer 5

if you are concerned about someone fraudulently using your credit

Question 6

inflation is an economic condition in which prices increase over time. With this in mind, choose the answer which is most correct.

a).Inflation reduces purchasing power in the future.
b). Inflation is when interest rates rise.
c).Inflation increases purchasing power in the future.
d). Inflation was only relevant in the 1970’s.
e). Inflation erodes purchasing power in the past

Answer 6

a).Inflation reduces purchasing power in the future.

Question 7

CPI (the Consumer Price Index) is a measure of the overall inflation rate in the US. Using the inflation calculatorLinks to an external site., prices are ______higher in 2023 than in 1987.

a. 2.78%
b). 3.65%
c). 168.22%
d). 0%, because prices remained the same.

Answer 7

answer is c). 168.22% (PRICE INCREASE if looking between 2 years not INFLATION RATE)

Question 8

Using the inflation calculatorLinks to an external site., $100 worth of goods in the year 2002 cost how much in 2023?

a. No change
b. $169.37
c. $304.702
d. $179.90

Answer 8

b. $169.37

Question 9

Inflation is classified by three different types. Which answer is not one of the types of inflation?
a). Built-in
b. Cost-push
c. Demand- pull
d. Price Bubble

Answer 9

d. price bubble

Question 10

If the government prints more money, then more money is circulating in the economy. This is________?
a. Inflationary
b. Causes “easy money” effect, meaning interest rates drop.
c. neither inflationary nor deflationary
d. Deflationary
e. Irrelevant to prices

Answer 10

a. inflationary

Question 11

what is the difference between progressive taxes and regressive taxes?

Answer 11

progressive tax: imposes a higher tax rate on higher income earners, if a person’s income increases, so does the tax rate on their income.

regressive tax: imposes a higher tax burden on lower income earners, is relative to income. it happens because the tax is a fixed amount, and takes a larger % of income from low income earners.

Question 12

what is a ‘‘flat tax’’

Answer 12

a tax system that is a single constant tax rate applied to all taxpayers regardless of income

Question 13

explain FICA tax

Answer 13

also known as payroll tax, it is imposed on both employees and employers to fund social security and medicare

Question 14

define state tax

Answer 14

state tax - taxes imposed by individual states on income, property sales, and other activities that fall under their jurisdiction.

Question 15

annual = ?
semi annually = ?
quarterly= ?
monthly=?

Answer 15

1
2
4
12

Question 16

what is before tax deductions?

Answer 16

are amounts subtracted from an individual’s gross income before taxes are calculated. these deductions lower taxable income, and pays income taxes on a lower amount. examples include retirement plan contributions like 401K, and 403b

Question 17

what are after-tax deductions?

Answer 17

amounts taken from an individual’s paycheck after federal, state, and other taxes have been applied to the gross income.
examples include Roth IRA, disability insurance, and union dues.

Question 18

what is the net pay formula?

Answer 18

total gross - total taxes - total deductions = net pay

Question 19

W-4

Answer 19

purpose: to ensure your employer withholds the correct federal income tax from your pay.
*it can be done more than once if you had more than 1 job, a death happened, or a divorce.
*if you claim more children on W-4, less money will be deducted from your paycheck or federal income taxes.
extra witholding

Question 20

extra-witholding from W-4

Answer 20

it is an additional amount of money that you can choose to have witheld from your paycheck for federal income taxes
*more or less money gets taken out
*multiple jobs changes the tax bracket

Question 21

W-2

Answer 21

how much money you were paid, and how much you paid for taxes
this form is used by employees to file their federal and state tax returns.
*it is done by employer
*multiple for multiple jobs
*use this to fill out tax form
*company based
*transferred to 1040 form

Question 22

tax bracket ex. 28%

Answer 22

it’s a stair step, max amount of taxes until you reach your bracket so less than 28%.

Question 23

FICO scores

Answer 23

referred to as Fair Issac Corporation, it determines an individual’s credit worthiness. scores range from 300 (worst) to 850 (best)

factors affecting FICO score
35% = payment history (paying bills on time)
30% amount owed (how much you owe or how much owed)
15% length of credit history = longer credit histories are better, as it shows more about spending habits
10% types of credit = having a variety of credit like car, credit card, furniture , mortgage
10% new credit = opening up new credit accounts in a short period can negatively affect credit score

Question 24

credit scores

Answer 24

-500 = poor credit score
+640 = good credit score
+700 - 800 = excellent credit scores

Question 25

if you want to freeze your credit where do you go?

Answer 25

a credit bureau

Question 26

credit freeze vs. credit lock

Answer 26

credit freeze = restricts access to credit report, will not allow thieves to open new accounts in your name.
*to freeze credit, must contact one of the 3 credit bueaus

credit lock = restricts access to credit report but can be unlocked or locked by you, can be done by app or online from credit bureaus

*credit locks are more conenient, freeze takes more effort to place and removed.

Question 27

what are the 2 most important parts of a credit card?

Answer 27

low interest rates and no annual fee

Question 28

what is a charge card?

Answer 28

no cap on how much you spend, however total balance needs to be paid by the due date. they require good to excellent credit for approval

Question 29

what is inflation?

Answer 29

too many dollars chasing too few goods (prices go up)

*Typically for goods, where people desire it more so price go up
*or goods are limited, so prices also go up
*If there is inflation, there can also deflation
*Can be both positive or negative effect on economy
*decreases purchasing power

Question 29

what are the different types of inflation?

Answer 29

1. demand-pull = more demand for goods and services and it exceeds the available supply
2. cost-pull = cost of production for goods and services increases, and producers charge more to maintain profit margins (can be for manufacturing, shipping, producing, or handling costs)
3. built-in = when workers demand higher wages to keep up with rising living costs, employers will increase prices to pass higher labor costs

Question 30

what are common effects of inflation?

Answer 30

Buy less with that dollar today
Inflation is a erosion of purchasing (FACT)

Inflation keeps Deflation at Bay
Inflation Feeds on Itself when it’s high
hyperinflation (ex. Inflation in germany in 1920s)
Inflation is on a loop, prices can changes daily
Hyperinflation can lead to a depression
Inflation can cause interest rates, not direct association but related
Federal Reserve - first place that loans money, governments first bank?
Too many dollars and too few goods can cause prices to up
If interest rates are lowering, it stimulates the economy, so people can borrow more and spend more
Interest rates are controlled by the FED
Fed Mandate, control inflation, and avoid recession (balancing effect, what the FED is trying to do)
Stagflation, when the economy is bad but prices go up
Economic Bubble or Price Bubble - an unstable growth in prices, and the government can’t regulate..?
After the Stock Market Crash of 1929, there happens to be a recession
Recession and Depression are the same, one is more worse than the other

Question 31

what is the peak inflation rate?

Answer 31

8%

Question 32

what is the inflation rate now?

Answer 32

3%

Question 33

what does CPI measure?

Answer 33

inflation

Question 34

what goes into CPI?

Answer 34

Apparel
Transportation
Education
Other goods and services
Housing
Medical care
Food and beverages

Question 35

true or false: CPI and inflation have a direct relationship

Answer 35

true, as CPI increases, prices increase and lead to erosion or purchasing power, which means consumers money buys less over time

Question 36

price vs. cost

Answer 36

price = pay for something
cost = production cost, cost to make