#1
Which of the following is considered a form of passive income?
Interest earned on savings account
ExplanationEarning money without active involvement through interest on savings.
#2
Which of the following is an example of a regressive tax?
Sales tax
ExplanationA tax where the rate decreases as the amount subject to taxation increases.
#3
Which of the following is an example of a tax-deductible expense?
Medical expenses
ExplanationExpenses that can be subtracted from adjusted gross income to lower taxable income.
#4
What is the purpose of a 'FICO score' in the context of creditworthiness?
Evaluating credit risk based on credit history
ExplanationA numerical representation of an individual's creditworthiness based on credit history and other financial behavior.
#5
In personal finance, what does the term 'liquidity' refer to?
Ability to access cash quickly without significant loss
ExplanationThe ease with which assets can be converted to cash without substantial loss of value.
#6
What does the term '401(k)' refer to in the context of personal finance?
Retirement savings plan
ExplanationA tax-advantaged retirement savings plan for individuals.
#7
In the context of income tax, what does 'AGI' stand for?
Adjusted Gross Income
ExplanationTotal income minus specific deductions, providing a key figure for taxation.
#8
What is the purpose of a 'credit score' in personal finance?
Determining eligibility for loans and credit cards
ExplanationAssessing an individual's creditworthiness and likelihood of repaying loans.
#9
Which type of investment typically involves a fixed interest rate and a set maturity date?
Bonds
ExplanationDebt securities with fixed interest payments and a specified maturity date.
#10
What is the purpose of the 'IRA' (Individual Retirement Account) in personal finance?
Saving for retirement with tax advantages
ExplanationA tax-advantaged account designed for retirement savings.
#11
What is the primary purpose of a 'W-4' form in the United States?
Withholding federal income tax
ExplanationDetermining the amount of income tax to be withheld from an employee's paycheck.
#12
What is the concept of 'tax deduction' in income tax?
Reducing taxable income by certain expenses
ExplanationLowering taxable income by deducting eligible expenses, reducing overall tax liability.
#13
In the context of budgeting, what does the term 'discretionary spending' refer to?
Variable expenses that can be adjusted
ExplanationNon-essential expenses that can be changed or eliminated in a budget.
#14
What is the purpose of an emergency fund in personal finance?
Covering unexpected expenses
ExplanationProviding a financial cushion to handle unforeseen and urgent expenses.
#15
In the United States, what is the deadline for filing individual income tax returns?
April 15
ExplanationThe annual due date for submitting personal income tax returns.