Deck 3: Earnings and Income: the Building Blocks of Your Financial Journey

Question 1

What should you do to accumulate wealth?

A) Accumulate a surplus.
B) Begin saving the surplus as early as possible.
C) Keep your money working for you as long as possible.
D) All of these answer choices are correct.

Answer 1

All of these answer choices are correct.

Question 2

To accumulate wealth, you need to generate a(n)

A) surplus.
B) deficit.
C) expense.
D) loan.

Answer 2

surplus.

Question 3

Which of the following is the recommended targeted savings rate if you wait until age 40 to start saving?

A) 10%.
B) 12%.
C) 15%.
D) 20%.

Answer 3

20%.

Question 4

Which of the following is what employers pay for an employee to work, typically on an hourly basis?

A) Income.
B) Earnings.
C) Salary.
D) Wage.

Question 5

Which of the following may result from spending beyond your income?

A) More saving.
B) More borrowing.
C) Increased net worth.
D) Decreased liabilities.

Question 6

Which of the following refers to the money left over after all of your expenses have been paid?

A) Surplus.
B) Deficit.
C) Net worth.
D) Assets.

Question 7

Which of the following indicates the percentage of your income that you are spending to pay down your debts?

A) Surplus.
B) Total debt-to-income ratio.
C) Targeted savings ratio.
D) Savings ratio.

Question 8

Which of the following is a payment for a set period of time, typically a year?

A) Income.
B) Earnings.
C) Salary.
D) Wage.

Question 9

Which of the following is the recommended targeted savings rate if you are between age 30 and 40?

A) 10%.
B) 12%.
C) 15%.
D) 20%.

Question 10

Which of the following is the total debt-to-income ratio?

A) × 1,000.
B) × 100.
C) × 100.
D) × 100.

Question 11

Which of the following is the recommended targeted savings rate if you are under age 30?

A) 10%.
B) 12%.
C) 15%.
D) 20%.

Question 12

Which of the following refers to your income before any taxes or other expenses are deducted from your paycheck?

A) Annual income.
B) Salary.
C) Gross income.
D) Net pay.

Question 13

Which of the following is a payment based on the sale of a product or service?

A) Income.
B) Bonus.
C) Salary.
D) Commission.

Question 14

Which of the following can help you calculate savings ratio?

A)
B)
C)
D)

Question 15

Which of the following refers to having your employer take money automatically from your paycheck and contribute it directly to a retirement savings plan or a savings account?

A) Payroll deduction.
B) Total debt-to-income ratio.
C) Targeted savings ratio.
D) Savings ratio.

Question 16

Which of the following describes all sources of money obtained by individuals and households?

A) Income.
B) Social Security benefits.
C) Wage.
D) Bonus.

Question 17

Which of the following refers to expenses exceeding income?

A) Surplus.
B) Deficit.
C) Net worth.
D) Assets.

Question 18

Which of the following refers to compensation received for services performed for an employer?

A) Income.
B) Earnings.
C) Allowance.
D) Dividends.

Question 19

Which of the following is the same as savings ratio that you will try to attain over a specific time period?

A) Surplus.
B) Deficit.
C) Targeted savings ratio.
D) Assets.

Question 20

Which of the following indicates the percentage of income that you are actively saving?

A) Surplus.
B) Deficit.
C) Net worth.
D) Savings ratio.

Question 21

If you regularly receive more than $30 in tips per month, then federal rules allow for a minimum wage of ________ per hour.

A) $3.25
B) $7.25
C) $2.13
D) $7.13

Question 22

Which of the following is defined as working more than 40 hours in one week?

A) Income.
B) Bonus.
C) Commission.
D) Overtime.

Question 23

The small business survival rate ________ over time.

A) increases
B) declines
C) stays the same
D) None of these answer choices are correct.

Question 24

What percent of self-employed individuals have one or more employees working for them?

A) 25%.
B) 30%.
C) 35%.
D) 40%.

Question 25

The most common wage system is based on which of the following?

A) Income.
B) Hourly.
C) Salary.
D) Annually.

Question 26

Those on salary typically earn ________ than hourly workers, at least before overtime pay is included.

A) twice as much
B) more
C) less
D) There is no difference.

Question 27

How are those who graduate from college and work in a professional field typically paid?

A) Income.
B) Hourly.
C) Salary.
D) Annually.

Question 28

Which of the following refers to being totally responsible for paying all liabilities a business incurs?

A) Unlimited liability.
B) Limited liability.
C) Bankruptcy.
D) Self-employed.

Question 29

Which of the following is a supplemental payment usually based on performance or meeting certain production or sales requirements?

A) Income.
B) Bonus.
C) Salary.
D) Commission.

Question 30

Which of the following is the most basic type of partnership?

A) Limited partnership.
B) Limited liability partnership.
C) General partnership.
D) Sole proprietorship.

Question 31

Those on salary typically have ________ employee benefits than those working for a wage.

A) less expensive
B) worse
C) better
D) There is no difference.

Question 32

Which of the following is a characteristic of a self-employed individual?

A) Wanting to be his or her own boss.
B) Possessing a strong sense of individual responsibility.
C) Placing a high emphasis on individual effort.
D) All of these answer choices are correct.

Question 33

What is the default legal structure of a self-employed individual?

A) Corporation.
B) Partnership.
C) Sole proprietorship.
D) Employer.

Question 34

If an individual is self-employed and considered an independent contractor, what percent of Social Security and Medicare taxes is he or she required to pay relative to salaried individuals?

A) 10%.
B) 20%.
C) 50%.
D) 100%.

Question 35

How much will Mia earn per week given the following information: works 45 hours per week at $12 base rate per hour and overtime for any work over 40 hours per week?

A) $540.
B) $570.
C) $600.
D) $480.

Question 36

Which of the following refers to earning income from a business that you operate?

A) Employed.
B) Self-employed.
C) Wage.
D) Salary.

Question 37

How much is the minimum wage in the United States?

A) $7.25 per hour.
B) $8.25 per hour.
C) $9.25 per hour.
D) $10.25 per hour.

Question 38

What percent of all workers in the United States are self-employed?

A) 5%.
B) 10%.
C) 15%.
D) 25%.

Question 39

Jorge earns $20 per hour. He works 40 hours per week and takes 2 weeks of paid vacation each year. How much does Jorge earn per year, assuming that he does not receive overtime pay?

A) $40,000.
B) $41,600.
C) $46,000.
D) $51,000.

Question 40

Which of the following refers to a partnership where there is a general partner who manages the business and one or more limited partners who simply invest money into the partnership and are not involved in the day-to-day management?

A) Limited partnership.
B) Limited liability partnership.
C) General partnership.
D) Sole proprietorship.

Question 41

Which of the following refers to a combination of earned and unearned income?

A) Salary.
B) Commission.
C) Bonus.
D) Total income.

Question 42

Which of the following refers to the money you receive from the investments that you have made?

A) Earned income.
B) Unearned income.
C) Interest.
D) Government benefits.

Question 43

What type of partnership is designed for professionals working in a partnership so that partners will not be held liable for the negligent actions (and resulting liabilities) of other partners but they will still be liable for the general obligations of the business?

A) Limited partnership.
B) Limited liability partnership.
C) Limited liability company.
D) General partnership.

Question 44

Which of the following tells you how long it will take to double your money?

A) Subjective risk.
B) Objective risk.
C) Rule of 72.
D) Economic life span.

Question 45

Which of the following types of partnership is often used by doctors, attorneys, and accountants?

A) Limited partnership.
B) Limited liability partnership.
C) General partnership.
D) Sole proprietorship.

Question 46

Which of the following refers to money you receive from work?

A) Earned income.
B) Unearned income.

Question 47

Which of the following is a source of unearned income?

A) Dividends.
B) Interest from savings accounts.
C) Social Security benefits.
D) All of these answer choices are correct.

Question 48

Which of the following are sources of earned income?

A) Lottery winnings.
B) Proceeds from a savings bond.
C) Government benefits.
D) Wages.

Question 49

Which of the following is an example of earned income?

A) Tips.
B) Loans to others.
C) Dividends from ownership of a business.
D) Deposits in a bank.

Question 50

Which of the following can be measured using probabilities and can often be quite high?

A) Subjective risk.
B) Objective risk.
C) Risk.
D) Dividends.

Question 51

Which of the following is a way that an individual may make money during his or her lifetime?

A) Employment.
B) Lending.
C) Investing.
D) All of these answer choices are correct.

Question 52

Which of the following shields the personal assets of the owner(s) from the liabilities of the business?

A) Limited partnership.
B) Limited liability partnership.
C) Limited liability company.
D) General partnership.

Question 53

Which of the following refers to personally developed probabilities of potential losses based on expectations, fear, worry, and other factors?

A) Subjective risk.
B) Objective risk.
C) Risk.
D) Dividends.

Question 54

Which of the following refers to an investor's share of the profits?

A) Salary.
B) Bonus.
C) Dividend.
D) Commission.

Question 55

When you stop working and retire, your total income will consist primarily of ________ income sources.

A) earned
B) unearned
C) employment
D) commission

Question 56

Which of the following varies from one person to another?

A) Subjective risk.
B) Objective risk.
C) Economic life span.
D) Rule of 72.

Question 57

Which of the following refers to a legal structure that is separate from the owners of the business?

A) Limited partnership.
B) Corporation.
C) General partnership.
D) Sole proprietorship.

Question 58

When you make a deposit, you are essentially ________ the bank or credit union money.

A) mishandling
B) taking
C) lending
D) giving

Question 59

If you are self-employed, how you choose to structure your business can have a big effect on your ability to make decisions about the business, such as issues related to which of the following?

A) Raising and borrowing money.
B) Limiting your liability.
C) Paying taxes.
D) All of these answer choices are correct.

Question 60

Which of the following are sources of unearned income?

A) Lottery winnings.
B) Proceeds from a savings bond.
C) Government benefits.
D) All of these answer choices are correct.

Question 61

Which of the following refers to the cost of an asset?

A) Basis of property.
B) Dividend.
C) Capital gain.
D) Capital loss.

Question 62

Mia recently purchased 500 shares of a company for $20,000 ($40 per share). This year, she received a dividend of $2,000. Her shares are now worth $120. What is Mia's per share basis in the company?

A) $40.
B) $80.
C) $120.
D) $500.

Question 63

When you inherit an asset because someone died, your basis becomes the fair market value as of the person's death. This refers to which of the following?

A) Long-term capital gain.
B) Short-term capital gain.
C) Stepped-up basis.
D) Capital asset.

Question 64

How long do unemployment benefits typically last?

A) 1 year.
B) 26 weeks or less.
C) 1 month.
D) 2 years.

Question 65

The rates on long-term gains are ________ short-term capital gain rates.

A) higher than
B) lower than
C) the same as
D) None of these answer choices are correct.

Question 66

To increase your investment income, you should do which of the following?

A) Buy assets that have the potential to go up in value.
B) Hold assets over the long term.
C) Let the power of compounding generate unearned income.
D) All of these answer choices are correct.

Question 67

Which of the following is an example of a government benefit?

A) Earnings.
B) Dividends.
C) Medicaid.
D) Commission.

Question 68

Which of the following refers to almost everything you own or use for personal or investment purposes?

A) Salary.
B) Capital asset.
C) Bonus.
D) Dividend.

Question 69

Which of the following is a capital asset?

A) Your home.
B) Your car.
C) Your investments.
D) All of these answer choices are correct.

Question 70

You purchased an apartment building for $100,000 and sold it 3 years later for $120,000. You paid 5% to the real estate agent who listed the property. How much is your realized gain?

A) $120,000.
B) $20,000.
C) $14,000.
D) $100,000.

Question 71

Which of the following capital losses can be reported to the Internal Revenue Service and may reduce your tax liability?

A) Sale of a home.
B) Sale of a car.
C) Sale of an investment.
D) Sale of clothes.

Question 72

Which of the following happens when you sell an asset for less than you paid for it?

A) Capital gain.
B) Capital loss.
C) Dividends.
D) You break even on the sale.

Question 73

If you hold an asset for more than one year and then sell it for a profit, you will be taxed at a rate of which of the following?

A) Long-term capital gains.
B) Short-term capital gains.
C) Normal dividends.
D) Capital assets.

Question 74

Which of the following is a health insurance program for low-income households?

A) Temporary Assistance for Needy Families (TANF).
B) Medicare.
C) Medicaid.
D) Supplemental Nutrition Assistance Program (SNAP).

Question 75

Which of the following is a typical fringe benefit?

A) Health insurance.
B) Retirement savings.
C) Sick and vacation pay.
D) All of these answer choices are correct.

Question 76

Which of the following is part of the process resulting in capital gains?

A) You buy or somehow obtain an asset.
B) You hold the asset for some length of time, usually to allow it to go up in value.
C) You sell the asset.
D) All of these answer choices are correct.

Question 77

Which of the following refers to cash payments made to individuals who have recently lost their jobs due to no fault of their own?

A) Unemployment benefits.
B) Medicaid.
C) Supplemental Nutrition Assistance Program (SNAP).
D) Earnings.

Question 78

At what point in time may you have to be taxed on an investment?

A) When the investment increases in value.
B) When the investment decreases in value.
C) Every tax year.
D) When you sell or exchange the investment asset.

Question 79

Which of the following happens when you sell an asset for more than you paid for it?

A) Capital gain.
B) Capital loss.
C) Dividends.
D) You break even on the sale.

Question 80

You purchased an apartment building for $700,000 and sold it 5 years later for $820,000. You paid 6% to the real estate agent who listed the property. How much is your realized gain?

A) $120,000.
B) $70,800.
C) $49,200.
D) $80,000.