(Test Bank) Personal Financial Planning

Billingsley,Gitman,et al., 13

Business

Test Bank

13th Edition

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Test Bank for Personal Financial Planning, The downloadable file consists of 450 pages, and the total size of the file is 3.14 MB. Purchase now only for highly discounted price.

Author(s): Billingsley, Gitman, et al.

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Personal Financial Planning Ed.13 Randy Billingsley, Lawrence J. Gitman, et al. Test Bank 2021 Chapter 1 —Understanding the Financial Planning Process TRUE/FALSE 1. Standard of living is defined as the necessities, comforts, and luxuries desired by an individual or group. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 2. Your average propensity to consume is the percentage of each dollar of income, on the average, that is spent for current needs rather than savings. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 3. A good financial plan completed when one is in their 30s will typically last a lifetime. ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Synthesis 4. Financial planning is a continuing, life -long process. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial M arkets and Interest Rates KEY: Bloom's: Comprehension 5. Financial planning can improve your standard of living. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Compreh ension 6. Current consumption is inversely related to saving for the future. ANS: T PTS: 1 DIF: Challenging OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Analysis 7. About 20% of Americans say retirement planning is their most pressing financial concern. ANS: F PTS: 1 DIF: Moderate OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 8. The most effe ctive way to achieve financial objectives is through financial planning. ANS: T PTS: 1 DIF: Moderate OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 9. Defining financial goals i s an important first step in personal financial planning process. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 10. Two persons with equal average propensities to consume will not necessarily have equal standards of living because of differences in income. ANS: T PTS: 1 DIF: Challenging OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Int erest Rates KEY: Bloom's: Evaluation 11. The need for financial planning declines as your income increases. ANS: F PTS: 1 DIF: Moderate OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Synthes is 12. Current consumption effects future consumption. ANS: T PTS: 1 DIF: Challenging OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Analysis 13. A person who has $2,000 monthly income and spends $1,800 monthly has an average propensity to consume of 90%. ANS: T PTS: 1 DIF: Challenging OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Evalu ation 14. A person making $35,000 and spending $30,800 has an average propensity to consume of 80%. ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Evaluation 15. Most families find it difficult to discuss money matters. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 16. Average propensity to consume refers to how much of your money you plan to save in your financial plan. ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 17. Tangible assets are earning assets that are held for the returns they promise. ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Compreh ension 18. Financial assets are paper assets, such as savings accounts and securities. ANS: T PTS: 1 DIF: Moderate OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 19. Mutual fu nds are examples of financial assets. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Application 20. Spending for your child's private -school education is an example of deferred consumption. ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Application 21. Wealth can be defined as the total value of all the things you own. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 22. Wealth is the key consideration is establis hing financial goals as it is the measure of value in financial transactions. ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 23. Financial assets include investments such as stocks and bonds. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Analysis 24. Utility refers to the amount of satisfactio n a person gets from buying certain items. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 25. A successful financial plan will be based on a person's goals. ANS: T PTS: 1 DIF: Moderate OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 26. Your personal value system will shape your attitude toward money and wealth accumulation. ANS: T PTS: 1 DIF: Moderate OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 27. It is possible to draw up one financial plan that will work for most people. ANS: F PTS: 1 DIF: Moderate OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 28. Financial planning is a dynamic process. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Fin ancial Markets and Interest Rates KEY: Bloom's: Comprehension 29. The first step in the financial planning process is to develop financial plans and strategies to achieve goals. ANS: F PTS: 1 DIF: Moderate OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 30. Money can be an emotional factor that may affect a person's financial plans. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 31. Long -term goals are typically for periods of over 6 years. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 32. Saving $3,000 for a large, flat -screen TV within the next 3 years is an example of a short -term goal. ANS: F PTS: 1 DIF: Easy OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Application 33. Short -term goals include things one wants to achieve in a year or less. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 34. Debt is another word for liability. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Application 35. Insurance provides a way to make money on unfortunate events. ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Analysis 36. Employee benefits can typically be transferred to a new job when one changes employers. ANS: F PTS: 1 DIF: Moderate OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 37. Your house is an example of a tangible asset. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinkin g STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Application 38. For most people working in large firms, employee benefits are an important part of their financial planning. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Application 39. A personal computer can be very useful in assisting one with their financial planning. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Synthesis 40. A financial goal that would be important in all stages of the life cycle is creating and maintaining an emergency fund. ANS: T PTS: 1 DIF: Moderate OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 41. Government controls consumers and businesses by regulation and taxation. ANS: T PTS: 1 DIF: Moderate OBJ: LO: 1 -4 NAT: BUSPRO G: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 42. Businesses are a key part of the circular flow of income that sustains our free enterprise system. ANS: T PTS: 1 DIF: Moderate OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 43. Consumer choices ultimately determine the kinds of goods and services businesses will provide. ANS: T PTS: 1 DIF: Challenging OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Analysis 44. GDP refers to the total earnings of American workers during a year. ANS: F PTS: 1 DIF: Moderate OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 45. Consumers affect businesses by their choices of what goods and services to purchase and by choosing whether they will spend or save their incomes. ANS: T PTS: 1 DIF: Moderate OBJ: LO: 1-4 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Analysis 46. How long you invest is not nearly as important as the rate of interest you can earn on your investments. ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Analysis 47. The longer you wait to begin retirement planning, the less you will likely have in your retirement fund. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Analysis 48. Inflation means price levels have declined. ANS: F PTS: 1 DIF: Easy OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: Finan cial Markets and Interest Rates KEY: Bloom's: Knowledge 49. The Consumer Price Index (CPI) is the amount of goods and services each dollar buys at a given point in time. ANS: F PTS: 1 DIF: Moderate OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 50. Typically, higher levels of education are rewarded with higher income over the lifetime. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -5 NAT: BUSPROG: Reflective thinking STA: DISC: Financi al Markets and Interest Rates KEY: Bloom's: Comprehension 51. Cities with higher costs of living also experience higher rates of inflation. ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1 -5 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and In terest Rates KEY: Bloom's: Knowledge 52. Accumulating wealth for later years is called estate planning. ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehe nsion 53. High interest rates after the financial crisis of 2008 -2009 reflect the Federal Reserve’s efforts to tighten, or reduce, the money supply. ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking KEY: Bloom's: Knowledge 54. The government employs monetary and fiscal policy to ensure the economy always remains stable. ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking KEY: Bloom's: Analysis 55. A strong economy leads to higher levels of emp loyment. ANS: T PTS: 1 DIF: Easy OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking KEY: Bloom's: Analysis 56. An economic contraction usually begins after a trough is reached. ANS: F PTS: 1 DIF: Easy OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking KEY: Bloom's: Knowledge 57. The financial crisis of 2008 and 2009 was the first depression the U.S. has experienced in 75 years. ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking KEY: Bloom's: Synthesis MULTIPLE CHOICE 1. Personal financial management is important because it a. controls inflation. b. limits consumption. c. uses money as an end. d. makes personal financial goals easier to achieve. e. lessens economic differences among individuals. ANS: D PTS: 1 DIF: Moderate OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Analysis 2. Financial planning can help us to a. control inflation. b. spend wisely. c. control unemployment rates. d. a and b. e. a, b, and c. ANS: B PTS: 1 DIF: Easy OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 3. The last step in the financial planning process is to a. develop financial plans and strategies to achieve goals. b. use financial statements to evaluate results of plans and budgets, taking corrective action as required. c. implement financial plans and strategies. d. redefine goals and revise plans and stra tegies as personal circumstances change e. periodically develop and implement budgets to monitor and control progress toward goals. ANS: D PTS: 1 DIF: Moderate OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 4. The term most closely associated with quality of life is a. wealth. b. consumption. c. education. d. standard of living. e. money. ANS: D PTS: 1 DIF: Easy OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Application 5. A primary determinant of your quality of life is a. a tax bill. b. tangible property. c. wealth. d. motivation. e. income potential. ANS: C PTS: 1 DIF: Challenging OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Analysis 6. The average propensity to consume refers to the a. dollars of income spent for current consumption. b. percentage of income saved. c. expenditures for the minimum necessities of life. d. percentage of income spent for current consumption. e. fact that people with higher incomes spend more for the necessities of life. ANS: D PTS: 1 DIF: Easy OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 7. Becky graduated with a master degree in Personal Financial Planning. After working two years in a small financial planning firm, Becky earns $60 ,000 annually and saves $10,000 a year. What is her average propensity to consume? a. 16.7% b. 25.5% c. 75.7% d. 83.3% e. 95.5% ANS: D PTS: 1 DIF: Challenging OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Evaluation 8. When setting financial goals, one should typically start by setting a. short -term goals. b. Intermediate -term goals. c. long-term goals. d. a and b e. b and c ANS: C PTS: 1 DIF: Moderate OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 9. Which of the following goals is stated in a way that is most useful for developing a financial plan? a. Make a $12,000 down payment on an automobile in 4 years b. Retire with a comfortable lifestyle in 25 years c. Buy a $125,000 house in 6 years d. Purchase a $40,000 boat e. Join the country club when retired in 20 years ANS: A PTS: 1 DIF: Challenging OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Application 10. Generally, as income rises, the average propensity to consume a. stabilizes. b. drops to zero. c. increases. d. becomes erratic. e. decreases. ANS: E PTS: 1 DIF: Moderate OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 11. The amount of money we set aside for future consumption will be determined by a. our level of current wealth. b. how much we currently earn and spend. c. our education level. d. the current needs of our family. e. the cost of life's necessities. ANS: B PTS: 1 DIF: Moderate OBJ: LO: 1 -1 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Synthesis 12. Money is a. the reason for all transactions. b. a medium of exchange. c. the purpose of our economy. d. a medium of consumption. e. a measure of propensity to consume. ANS: B PTS: 1 DIF: Moderate OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 13. Family financial goals should be a. very general in nature. b. realistically attainable. c. individually determined. d. set once for a lifetime. e. reserved for retirement planning. ANS: B PTS: 1 DIF: Moderate OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 14. Utility refers to a. the satisfaction you receive from purchasing something. b. how much money you receive during the year. c. the total of your spending for the year. d. the value of your investments at any given time. e. none of these. ANS: A PTS: 1 DIF: Easy OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 15. The main reason to do personal financial planning is to a. minimize overall costs. b. minimize overall utility. c. assign monetary value to consumption. d. maximize overall utility. e. stabilize overall utility. ANS: D PTS: 1 DIF: Moderate OBJ: LO: 1 -2 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Analysis 16. The most important financial planning for young people concerns a. career. b. insurance. c. investment. d. taxes. e. retirement. ANS: A PTS: 1 DIF: Moderate OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Application 17. Martha is 80 and has a very high net worth. Her most important financial concern is probably her a. career. b. employee benefits. c. estate. d. insurance. e. savings. ANS: C PTS: 1 DIF: Moderate OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Application 18. Sam and Lele are in their late 20s with 3 young children. Their most important financial planning concerns would probably include all of the following except a. asset acquisition planning. b. liability and insurance planning. c. retirement and estate planning. d. savings and investment planning. e. employee benefit planning. ANS: C PTS: 1 DIF: Moderate OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Application 19. Employee benefits may include a. retirement plans b. health insurance c. employee discounts d. tuition reimbursements e. all of the above ANS: E PTS: 1 DIF: Easy OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 20. Employee benefits may include a. health insurance b. disability insurance c. life insurance d. only a and b above e. all of the above ANS: E PTS: 1 DIF: Easy OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 21. Tax planning is most commonly done to a. reduce debt balances. b. change income patterns to avoid taxes. c. minimize taxes. d. pay extra taxes. e. learn the tax code. ANS: C PTS: 1 DIF: Easy OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 22. Investments are distinguished from savings on the basis of a. length of time held. b. initial dollar outlay. c. depreciation. d. voting rights. e. level of risk and expected return. ANS: E PTS: 1 DIF: Challenging OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Analysis 23. Estate planning involves a. considering how your wealth can be most effectively passed on to heirs. b. payment of all back taxes. c. dissolution of all privately held corporations. d. valuation and auctioning of your valuables. e. planning retirements. ANS: A PTS: 1 DIF: Easy OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 24. While you are still working, you should be managing your finances for retirement planning. Which of the following is not a goal of your retirement planning? a. maintaining your standard of living b. effectively passing wealth on to heirs c. a vacation home or boat d. travel ANS: B PTS: 1 DIF: Moderate OBJ: LO: 1 -3 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Synthesis 25. The three key groups in the economic environment are a. government, regulation, and business. b. government, consultants, and business. c. consumers, economists, and business. d. consumers, business, and managers. e. government, consumers, and business. ANS: E PTS: 1 DIF: Easy OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 26. Government places controls on the personal financial environment by use of a. taxation and fiscal policy. b. taxation and regulation. c. taxation and competition. d. regulation and competition. e. regulation and fiscal policy. ANS: B PTS: 1 DIF: Easy OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 27. Businesses provide a. stores. b. money payments. c. land and capital. d. labor. e. goods and services. ANS: E PTS: 1 DIF: Easy OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Comprehension 28. The individual consumer is a. a member of the business group. b. the party around which the personal financial envir onment is centered. c. an important force in government. d. an advocacy group. e. relatively unimportant to business or government. ANS: B PTS: 1 DIF: Moderate OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: F inancial Markets and Interest Rates KEY: Bloom's: Comprehension 29. The four stages of an economic cycle would not include a. depression. b. expansion. c. recession. d. recovery. e. stagnation. ANS: E PTS: 1 DIF: Easy OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 30. Inflation refers to a. rising prices. b. declining interest rates. c. the opposite of wealth. d. the opposite of stagflation. e. declining prices. ANS: A PTS: 1 DIF: Easy OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Knowledge 31. As the rate of inflation increases, a. the cost of living goes down. b. interest rates decrease. c. pay checks decrease. d. retirement plans have more difficulty meeting their goals. e. purchasing power of a dollar increases. ANS: D PTS: 1 DIF: Challenging OBJ: LO: 1 -4 NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates KEY: Bloom's: Analysis 32. The amount of goods and services each dollar buys at a given point in time is: a. inflation b. consumer price index (CPI) c. purchasing power d. none of the above ANS: C PTS: 1 DIF: Easy OBJ: LO: 1 -4