1) Which Education Tax Credit can be used for more than 1 child? a) The Lifetime Learning Credit (LLC) b) American Opportunity Tax Credit (AOTC) 2) What is capital gains tax? a) A tax on the value of property owned. b) A tax on the profit made from selling a capital asset. c) A tax on the amount of money spent on goods and services. 3) Which of the following is the best definition of propensity to consume? a) The amount of money a person saves. b) The amount of money a person spends on goods and services. c) The tendency of people to spend a certain proportion (%) of their income on goods and services. 4) In a progressive tax structure, your tax rate % depends upon your: a) net pay b) taxable income c) income before credits 5) Which ratio would be best to figure out my ability to quickly sell my assets to pay off short-term debts? a) liquidity b) solvency c) savings 6) Calculate the Future Value of an annuity (use finance calculator): Investment of $28,500 for 4 years at 3% interest. a) 30,050 b) 32,050 c) 35,077 d) 32,077 7) Tax _ is an illegal way to underreport income. a) evasion b) avoidance 8) Adam Smith attempted to systematize rules that should govern a rational system of taxation. He set down four general rules. Three of the rules include: equity, certainty, and convenience. The 4th rule is: a) rationalization b) economy c) status 9) A dollar-for-dollar amount taxpayers claim on their tax return to reduce the income tax they owe. a) tax credits b) tax deductions 10) Which statement is true about Balance Sheets vs Income/Expense Statements? a) Balance Sheet reports income not what you own. b) Income/Exp Statement reports income not what you own. c) Balance Sheet is not used by banks. d) Income/Expense Statements show net worth. 11) Using the 50/30/20 rule helps guide your budget -- which portion of the rule is for "wants"? a) 50 b) 30 c) 20 12) If I wanted to know how long it would take my money to double (in years), I would use the rule called: a) Rule of 90 b) Rule of 70 c) Rule of 72 d) Rule of 92 13) What are the differences between "fixed" and "variable" expenses? a) Fixed expenses are predetermined expenses that are made each period, such as rent, mortgage and loan payments. Variable expenses can change, like food, electricity... b) Variable expenses are predetermined expenses that are made each period, such as rent, mortgage and loan payments. Fixed expenses can change, like food, electricity... 14) Put these in correct order for the Business Cycle:  contraction, peak, expansion, trough a) Peak, Contraction, Trough, Expansion b) Expansion, Peak, Contraction, Trough c) Expansion, Peak, Trough, Contraction d) None 15) The amount of federal income tax withheld depends upon... a) Level of earnings & Number of Withholding Allowances b) Level of Earnings & Marital Status

FP Unit One Study Practice

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