1. The average propensity to consume is commonly viewed as a key determinant of standard of living.
a. True
b. False
ANSWER: False
2. Financial planning can improve your standard of living.
a. True
b. False
ANSWER: True
3. Standard of living is defined as the necessi...
Chapter 01: Understanding the Financial Planning Process
1. The average propensity to consume is commonly viewed as a key determinant of standard of living.
a. True
b. False
ANSWER: False
2. Financial planning can improve your standard of living.
a. True
b. False
ANSWER: True
3. Standard of living is defined as the necessities, comforts, and luxuries desired by an individual or a family.
a. True
b. False
ANSWER: True
4. Personal financial plans help individuals have the same standard of living across the country.
a. True
b. False
ANSWER: False
5. The most effective way to achieve financial objectives is through personal financial planning.
a. True
b. False
ANSWER: True
6. Two persons with significantly different income can have equal average propensities to consume because of differences
in their standards of living.
a. True
b. False
ANSWER: True
7. Mike’s annual income is $35,000, and he spends $30,800 for current needs. Mike’s average propensity to consume is
80%.
a. True
b. False
ANSWER: False
8. Tangible assets are earning assets that are held for the returns they promise.
a. True
b. False
ANSWER: False
9. It is very easy to change your partner’s financial style, so there is no need for financial planning to resolve conflicts
regarding money matters.
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Chapter 01: Understanding the Financial Planning Process
a. True
b. False
ANSWER: False
10. The need for financial planning declines as your income increases.
a. True
b. False
ANSWER: False
11. A good financial plan is completed when one is in his or her 30s and will typically last a lifetime.
a. True
b. False
ANSWER: False
12. Saving $3,000 for a large, flat-screen TV within the next 6 years is an example of a short-term goal.
a. True
b. False
ANSWER: False
13. Short-term planning should include creating and maintaining an emergency fund with six to nine months’ worth of
income.
a. True
b. False
ANSWER: True
14. It is not good to discuss your financial goals and attitudes toward money with your partner.
a. True
b. False
ANSWER: False
15. For employees of large firms, managing employee benefits is an important part of financial planning.
a. True
b. False
ANSWER: True
16. Accumulating wealth for later years is called estate planning.
a. True
b. False
ANSWER: False
17. The longer you wait to begin retirement planning, the less you are likely to have in your retirement fund.
a. True
b. False
ANSWER: True
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Chapter 01: Understanding the Financial Planning Process
18. Tax plans are closely tied to investment plans.
a. True
b. False
ANSWER: True
19. Most people tend to be more liberal about their expenditures during a recession or crisis.
a. True
b. False
ANSWER: False
20. You should always spend more than what you earn.
a. True
b. False
ANSWER: False
21. Commission-based financial planners charge fees for the financial products they sell.
a. True
b. False
ANSWER: False
22. Fee-only financial planners charge commission for the products they sell.
a. True
b. False
ANSWER: False
23. Estate planning does not include taking advantage of and managing employer-sponsored benefits.
a. True
b. False
ANSWER: False
24. Recessions and financial crises will always result in job loss.
a. True
b. False
ANSWER: False
25. Financial planning takes place in a dynamic economic environment created by the actions of the government,
business, and consumers.
a. True
b. False
ANSWER: True
26. Your purchase, saving, investment, and retirement plans and decisions are influenced only by the present state of the
economy.
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