Unit 2 - Budgeting
This test will test the students knowledge of the topic of Budgeting
Questions and Answers
- 1.
You should follow the same budget as long as necessary to control your spending and to meet your financial goals.
- A.
TRUE
- B.
FALSE
Correct Answer
B. FALSEExplanation
This statement is false because it suggests that one should follow the same budget indefinitely. However, financial goals and circumstances can change over time, requiring adjustments to the budget. It is important to regularly review and update the budget to ensure it aligns with current financial needs and goals.Rate this question:
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- 2.
A personal budget should be planned for a specific period of time.
- A.
TRUE
- B.
FALSE
Correct Answer
A. TRUEExplanation
A personal budget should be planned for a specific period of time because it helps individuals track their income and expenses over a set timeframe. By setting a specific period, such as a month or a year, individuals can allocate their income towards different categories such as rent, groceries, savings, and entertainment. This allows them to have a clear understanding of their financial situation and make necessary adjustments to meet their financial goals. Without a specific time frame, it would be challenging to effectively manage and track expenses, leading to potential financial difficulties.Rate this question:
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- 3.
You can think of P.Y.F. as a bill you owe yourself.
- A.
TRUE
- B.
FALSE
Correct Answer
A. TRUEExplanation
The statement suggests that P.Y.F. (Pay Yourself First) can be viewed as a bill that you owe yourself. This means that before spending money on other expenses, it is important to prioritize saving or investing a portion of your income for your future financial goals. By treating it as a bill, it emphasizes the importance of consistently setting aside money for yourself, just like you would with any other financial obligation. Therefore, the statement is true.Rate this question:
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- 4.
The best way to stay on track with your budget is to create the budget with spreadsheet software.
- A.
TRUE
- B.
FALSE
Correct Answer
B. FALSEExplanation
Creating a budget with spreadsheet software may be one effective way to stay on track with your budget, but it is not necessarily the best way. There are various methods and tools available to create and manage a budget, and the best way may vary depending on individual preferences and needs. Some people may find it more convenient to use budgeting apps, pen and paper, or specialized budgeting software. Therefore, the statement that creating a budget with spreadsheet software is the best way to stay on track with your budget is false.Rate this question:
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- 5.
Income and spending must balance each other.
- A.
TRUE
- B.
FALSE
Correct Answer
A. TRUEExplanation
The statement suggests that income and spending should be equal or in balance. This means that the amount of money a person earns should be equal to or less than the amount of money they spend. If income exceeds spending, it can lead to savings or investments, while if spending exceeds income, it can result in debt or financial instability. Therefore, it is important for individuals to manage their income and spending in order to maintain a balanced financial situation.Rate this question:
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- 6.
Which one of the following could not be called income?
- A.
An allowance
- B.
A paycheck
- C.
Interest paid on a loan
- D.
Interest received from a savings account
Correct Answer
C. Interest paid on a loanExplanation
Interest paid on a loan could not be called income because it represents an expense or a cost incurred by the borrower. Income refers to money received or earned, while interest paid on a loan represents an outgoing payment. Therefore, it cannot be considered as income.Rate this question:
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- 7.
What is the purpose of Form W-2?
- A.
To itemize how much money was earned by an employee and how much was withheld and sent to the Internal Revenue Service (IRS)
- B.
To allow the employee to participate in a tax-deferred savings plan
- C.
To document a refund or figure a balance due to the IRS each year
- D.
To allow the employer to withhold federal income taxes from an employee’s wages
Correct Answer
A. To itemize how much money was earned by an employee and how much was withheld and sent to the Internal Revenue Service (IRS)Explanation
The purpose of Form W-2 is to itemize how much money was earned by an employee and how much was withheld and sent to the Internal Revenue Service (IRS). This form provides a detailed breakdown of the employee's income and tax withholdings, which is necessary for the IRS to accurately calculate the employee's tax liability. It is an important document for both the employee and the IRS to ensure accurate reporting and payment of taxes.Rate this question:
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- 8.
What is the purpose of Form W-4?
- A.
To itemize how much money was earned by an employee and how much was withheld and sent to the Internal Revenue Service (IRS)
- B.
To allow the employee to participate in a tax-deferred savings plan
- C.
To document a refund or figure a balance due to the IRS each year
- D.
To allow the employer to withhold federal income taxes from an employee’s wages
Correct Answer
D. To allow the employer to withhold federal income taxes from an employee’s wagesExplanation
The purpose of Form W-4 is to allow the employer to withhold federal income taxes from an employee's wages. This form is used to determine the amount of taxes that should be withheld from an employee's paycheck based on their filing status, number of dependents, and any additional withholdings they may choose. By completing this form, the employee provides the necessary information for the employer to accurately withhold the appropriate amount of federal income taxes from their wages.Rate this question:
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- 9.
Use Pete Dixon's pay stub shown here to answer Questions 9-11.What is Pete's gross income for this pay period?
- A.
$154.32
- B.
$240.00
- C.
$933.65
- D.
$1,452.00
Correct Answer
B. $240.00Explanation
Based on Pete Dixon's pay stub, the gross income for this pay period is $240.00. This can be determined by looking at the "Gross Pay" section on the pay stub, which indicates the total amount of money earned before any deductions or taxes are taken out.Rate this question:
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- 10.
What is Pete’s net income so far this year?
- A.
$ 154.32
- B.
$ 240.00
- C.
$ 933.65
- D.
$1,452.00
Correct Answer
C. $ 933.65Explanation
Pete's net income so far this year is $933.65. This means that after deducting all expenses and taxes from his total income, Pete has earned a net income of $933.65.Rate this question:
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- 11.
To reach her financial goals, Rhonda has calculated that she needs an additional $25 per week in gross pay. Rhonda can only work 20 hours per week during the school year, so she wants to ask her supervisor for a raise to increase her income. If she currently earns $6.75 per hour, how much should her hourly wage be raised to increase her weekly gross pay by $25?
- A.
50 cents
- B.
75 cents
- C.
$1.25
- D.
$7.75
- E.
$8.00
Correct Answer
C. $1.25Explanation
Rhonda needs an additional $25 per week in gross pay. She currently earns $6.75 per hour and can only work 20 hours per week. To calculate how much her hourly wage should be raised, we divide the additional amount she needs ($25) by the number of hours she works per week (20). This gives us $1.25, which means her hourly wage should be raised by $1.25 in order to increase her weekly gross pay by $25.Rate this question:
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- 12.
How much will Rhonda earn per hour if she does get the raise she wants?
- A.
$6.75
- B.
$7.25
- C.
$7.75
- D.
$8.00
Correct Answer
D. $8.00Explanation
The correct answer is $8.00 because it is the highest option among the given choices. Since Rhonda wants a raise, it is logical to assume that she will aim for the highest possible hourly wage. Therefore, if she does get the raise she wants, she will earn $8.00 per hour.Rate this question:
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- 13.
Marcus set a goal to buy a used car in the next few months. He plans to make a $2,500 down payment and has already saved $1,300. If he can save $150 each month for this goal to buy a car, how long will it take him to save the entire $2,500?
- A.
6 months
- B.
8 months
- C.
10 months
- D.
12 months
Correct Answer
B. 8 monthsExplanation
Marcus plans to save $150 each month for his goal of buying a used car. He has already saved $1,300 and needs to save a total of $2,500. To determine how long it will take him to save the entire amount, we can subtract the amount he has already saved ($1,300) from the total amount needed ($2,500), which leaves $1,200. Dividing $1,200 by the amount he saves each month ($150) gives us 8. Therefore, it will take Marcus 8 months to save the entire $2,500.Rate this question:
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- 14.
Lee wants to set up a budget, so he has asked for your help to draft it. He hesitates when you ask him to predict how much income he will have each month because he works more hours per week in the summer than during the school year. What will help him estimate his income for a specific month?
- A.
His W-2 statement from the previous year
- B.
His W-4 form from the previous year
- C.
His pay stub from the previous pay period
- D.
His pay stubs from the past year
Correct Answer
D. His pay stubs from the past yearExplanation
To estimate his income for a specific month, Lee can refer to his pay stubs from the past year. By reviewing his pay stubs, he can identify any patterns or trends in his income during different months. This will help him make an informed estimate of his income for a specific month, taking into account factors such as seasonal variations in his work hours. The W-2 statement and W-4 form provide information about taxes and withholding, but they do not provide specific details about monthly income.Rate this question:
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- 15.
Any money you receive such as an allowance or paycheck
- A.
Fixed Expense
- B.
Gross Income
- C.
Income
- D.
Payroll Deductions
- E.
Net Income
Correct Answer
C. IncomeExplanation
Questions 15 thru 19 are matching - the same word will not be reused.Rate this question:
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- 16.
An amount of money spent to buy something or do something that is the exact same amount every time
- A.
Fixed Expense
- B.
Net Income
- C.
Gross Income
- D.
Payroll deductions
- E.
Variable Expenses
Correct Answer
A. Fixed ExpenseExplanation
A fixed expense refers to an amount of money that is spent consistently and remains the same every time. This type of expense is predictable and does not fluctuate. It is a regular payment that needs to be made, such as rent, mortgage, or a monthly subscription fee. Unlike variable expenses, which can change from month to month, fixed expenses provide stability in budgeting and financial planning.Rate this question:
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- 17.
Taking a certain amount of all money you receive and saving it to be used for spending on longer-term goals
- A.
Income
- B.
Gross Income
- C.
Payroll Deductions
- D.
P.Y.F
- E.
Variable Expenses
Correct Answer
D. P.Y.FExplanation
The correct answer is P.Y.F, which stands for "Pay Yourself First". This refers to the practice of setting aside a certain portion of your income to be saved and used for longer-term goals, such as retirement or a down payment on a house. By prioritizing saving and setting aside money before spending on variable expenses, individuals can ensure that they are building financial security and working towards their financial goals.Rate this question:
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- 18.
Money taken out of a paycheck by an employer to pay for taxes, health insurance, and other payments
- A.
Payroll Deductions
- B.
P.Y.F.
- C.
Net Income
- D.
Variable Expenses
- E.
Spending and Saving Plan
Correct Answer
A. Payroll DeductionsExplanation
Payroll deductions refer to the money that is deducted from an employee's paycheck by the employer to cover various expenses such as taxes, health insurance, and other payments. These deductions are mandatory and are taken out before the employee receives their net income. Payroll deductions help ensure that employees fulfill their financial obligations and contribute towards their benefits and taxes.Rate this question:
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- 19.
Take-home pay
- A.
Fixed Expenses
- B.
Gross Income
- C.
Spending Savings Plan
- D.
Income
- E.
Net Income
Correct Answer
E. Net IncomeExplanation
Net income refers to the amount of money that an individual or business earns after deducting taxes and other expenses from their gross income. It represents the actual income that is available for spending or saving after all the necessary deductions have been made. In the context of personal finance, net income is often used to calculate one's take-home pay, which is the amount of money that is received after taxes and other deductions are taken out of their gross income. Therefore, net income is the correct answer in this case as it accurately represents the income that is available for personal use.Rate this question:
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Mar 22, 2023Quiz Edited by
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Feb 09, 2010Quiz Created by
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