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Personal Finance Fundamentals
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Personal Finance Fundamentals
Personal Finance Fundamentals
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1
Question
What are the four components listed in the Step 5 action plan table for Sarah?
Answer
Plan, Implementation, Assistance, Flexibility.
2
Question
What do financial regulators include according to Exhibit 1-4?
Answer
Federal Reserve, FDIC, NCUA, OCC, CFPB, SEC, state agencies.
3
Question
What are the main flows in the financial system as described in Exhibit 1-4?
Answer
Providers of funds -> Intermediaries -> Users of funds.
4
Question
Which entities are listed as users of funds in the financial system diagram?
Answer
Individuals, businesses, governments, foreign entities.
5
Question
What is the role of financial intermediaries in the financial system diagram?
Answer
They connect providers of funds with users, including banks, insurers, and investment firms.
6
Question
What is one effect of global influences on the economy mentioned in the text?
Answer
Exports/imports influence the value of the dollar.
7
Question
What are the two main categories of participants in the financial system?
Answer
Providers of funds and users of funds, with intermediaries between them.
8
Question
Who are the providers of funds in the financial system?
Answer
Savers and investors: individuals, businesses, governments, and foreign entities.
9
Question
What entities earn interest and dividends for funds provided?
Answer
Providers of funds (savers/investors).
10
Question
Name three types of financial intermediaries.
Answer
Banks or credit unions, insurance companies, investment companies.
11
Question
What are the main financial markets?
Answer
Stock markets, bond markets, money markets, and commodity markets.
12
Question
Who are the users of funds in the financial system?
Answer
Borrowers/spenders: individuals, businesses, governments, and foreign entities.
13
Question
What do users of funds pay to access borrowed funds?
Answer
Interest and often dividends.
14
Question
Name at least three financial regulators mentioned.
Answer
Federal Reserve System, FDIC, NCUA, OCC, CFPB, SEC.
15
Question
What is the role of the Federal Reserve in the economy?
Answer
Regulates money supply and influences borrowing costs and interest rates.
16
Question
What is the impact of global competition on prices and quality?
Answer
Affects product prices and quality through international competition.
17
Question
How do exports and imports influence the value of the dollar?
Answer
They influence the exchange rate and dollar value.
18
Question
What is the effect of foreign investment on U.S. financial conditions?
Answer
Impacts interest rates and money supply.
19
Question
What can a trade deficit do to the price of foreign goods?
Answer
Can weaken the dollar and raise the cost of imported goods.
20
Question
What does the Consumer Price Index (CPI) track?
Answer
Everyday costs like housing, food, and fuel; measures inflation.
21
Question
What does Rule of 72 estimate?
Answer
Approximate time for money to double given a constant rate.
22
Question
If inflation is 4%, how long until prices double according to the Rule of 72?
Answer
About 18 years.
23
Question
What is deflation and why can it be harmful?
Answer
Falling prices; can reduce jobs and wages.
24
Question
What is meant by housing starts?
Answer
Number of new homes being built.
25
Question
What are SMART goals?
Answer
Specific, Measurable, Action-oriented, Realistic, Time-based goals.
26
Question
What does the 'Specific' component require in SMART goals?
Answer
Clear, exact description of the goal.
27
Question
What is meant by 'Time-based' in SMART goals?
Answer
A defined time frame to achieve the goal.
28
Question
Give an example of a SMART goal element: Specific.
Answer
Pay off $1,200 credit card debt.
29
Question
Give an example of a SMART goal element: Measurable.
Answer
Make $150 monthly payments.
30
Question
Give an example of a SMART goal element: Realistic.
Answer
Fits $600 positive monthly cash flow.