CAEC Financial Literacy and Personal Finance 1

Question 1

What is the difference between gross income and net income?

Accepted Answer

Gross income is before taxes and deductions; net income is after taxes and deductions

Answer

Gross income is after taxes; net income is before taxes

Answer

Gross income includes overtime pay; net income does not

Answer

Gross income is annual; net income is monthly

Question 2

Which of the following is an example of a fixed expense?

Accepted Answer

Monthly rent payment

Answer

Weekly grocery bills

Answer

Entertainment and dining costs

Answer

Clothing purchases

Question 3

What is the primary purpose of creating a personal budget?

Accepted Answer

To track and plan how you spend and save your money

Answer

To automatically increase your credit score

Answer

To apply for government assistance programs

Answer

To reduce the amount of income tax you owe

Question 4

According to the 50/30/20 budgeting rule, what percentage of after-tax income should go toward needs?

Accepted Answer

50%

Answer

20%

Answer

30%

Answer

70%

Question 5

What is an emergency fund?

Accepted Answer

Personal savings reserved for unexpected expenses or financial hardship

Answer

Money set aside by the government for natural disasters

Answer

A type of insurance policy for accidents

Answer

A credit card with a low interest rate for emergencies

Question 6

A pay stub shows $900 in gross pay and $200 in total deductions. What is the net pay?

Accepted Answer

$700

Answer

$1,100

Answer

$900

Answer

$200

Question 7

Which of the following would be considered a variable expense?

Accepted Answer

Monthly electricity bill

Answer

Monthly car insurance premium

Answer

Fixed mortgage payment

Answer

Annual gym membership paid in equal monthly installments