Question 1

Installment cash credit is a direct loan of money for personal purposes,home improvements,or vacation expenses.

Accepted Answer

Installment cash credit is indeed a direct loan of money for personal purposes, home improvements, or vacation expenses.

Question 2

Consumer credit refers to the use of credit for personal needs by individuals and families.

Accepted Answer

Consumer credit is specifically for personal use, rather than for business or commercial purposes. It includes things like credit cards, personal loans, and installment plans for large purchases like cars or homes.

Question 3

Single lump-sum credit is a loan that must be repaid in total on a specified day,usually within 30 to 90 days.

Accepted Answer

Single lump-sum credit, also known as a payday loan, is a short-term loan that typically must be repaid in full on the borrower's next payday. This usually falls within 30 to 90 days, depending on the lender's terms and the borrower's pay cycle.

Question 4

Credit,when effectively used,can help you have more and enjoy more.

Accepted Answer

When used wisely, credit can provide opportunities for purchasing items that may not have been possible with cash alone, leading to greater enjoyment of life's experiences. Additionally, responsible credit use can help build credit history and improve credit scores, leading to better interest rates and loan options in the future.

Question 5

With open-end credit,you pay back one-time loans in a specified period of time in payments of equal amounts.

Accepted Answer

Open-end credit, also known as revolving credit, does not have a specified repayment period or equal payments. Instead, the borrower can make payments as they use the credit line and the available credit replenishes as payments are made. Examples of open-end credit include credit cards and lines of credit.

Question 6

College students are not a prime target for credit card issuers.

Accepted Answer

College students are often targeted by credit card issuers due to their potential for future income and brand loyalty, making them a prime demographic for establishing new accounts.

Question 7

Although credit allows more immediate satisfaction of needs and desires,it does not increase total purchasing power.

Accepted Answer

While credit allows individuals to purchase goods and services before having the funds to do so, it ultimately does not increase their total purchasing power as they must pay back the borrowed money with interest. This can lead to lower future purchasing power due to the cost of paying off debt.

Question 8

Perhaps the greatest disadvantage of using credit is the temptation to overspend.

Accepted Answer

When using credit, individuals may be tempted to spend more than they have because they do not see the immediate impact on their finances. This can lead to high levels of debt and financial instability.

Question 9

Consumer credit is based on trust in people's ability and willingness to pay bills when due.

Accepted Answer

Consumer credit is extended to individuals based on their creditworthiness, which includes a history of paying bills on time and a demonstrated ability to repay debts. Lenders rely on this trust in order to feel confident extending credit to consumers.

Question 10

Most economists do not recognize consumer credit as a major force in the American economy.

Accepted Answer

Consumer credit is generally recognized as a significant force in the American economy, with consumer spending being a major driver of economic growth.

Question 11

Credit is an arrangement to receive cash,goods,or services now and pay for them in the future.

Accepted Answer

This is the definition of credit.

Question 12

Interest is a periodic charge for the use of credit.

Accepted Answer

Interest is a fee charged by lenders for the use of credit or money borrowed, and it can be charged periodically, such as monthly or annually.

Question 13

Consumer credit dates back to colonial times.

Accepted Answer

According to historical records, consumer credit existed in colonial times in the form of informal lending, shopkeeper credit, and installment plans.

Question 14

Closed-end credit is used for a specific purpose and involves a specified amount.

Accepted Answer

Closed-end credit is also known as installment credit, which involves borrowing a specified amount for a specific purpose and paying it back in fixed payments over a predetermined period of time. Examples of closed-end credit include auto loans, student loans, and mortgages.

Question 15

"Shopaholics" and young adults are most vulnerable to misusing credit.

Accepted Answer

Shopaholics and young adults are more prone to overspending and misusing their credit, which can lead to debt and financial difficulties.

Question 16

Using a credit card,such as Visa or MasterCard,is an example of closed-end credit.

Accepted Answer

Using a credit card is actually an example of open-end credit, where borrowing is ongoing and the amount borrowed can vary from month to month. Closed-end credit typically involves borrowing a specific amount of money for a set period of time, such as a car loan or mortgage.

Question 17

It is safer to use credit,since charge accounts and credit cards let you shop and travel without carrying a large amount of cash.

Accepted Answer

Credit cards offer more security and protection against fraud compared to carrying cash. Additionally, if your credit card is lost or stolen, you can report it and have it cancelled, whereas cash cannot be replaced once lost.

Question 18

With closed-end credit,loans are made on a continuous basis and you make at least a partial payment each billing period.

Accepted Answer

Closed-end credit refers to loans where a specific amount of money is borrowed and repaid over a fixed period of time with a set payment schedule. Examples include car loans, mortgages, and personal loans. In contrast, with open-end credit, also known as revolving credit, loans are made on a continuous basis (e.g. credit cards) and payments are made based on the balance owed each billing period.

Question 19

With closed-end credit,generally the seller holds the title to the merchandise until the payments have been completed.

Accepted Answer

This is because closed-end credit refers to a loan made for a specific amount of money that must be repaid with interest in installments over a set period of time. The item being purchased often serves as collateral for the loan, and the lender or seller retains ownership until the loan is paid off.

Question 20

Installment sales credit is a loan that allows you to receive high-priced items,such as large appliances or furniture.

Accepted Answer

Installment sales credit is a type of loan that allows you to purchase high-priced items and make payments over time with interest. This can include items such as furniture, appliances, or electronics.

Quiz 6: Introduction to Consumer Credit