PFIN 6th Edition by Billingsley - Test Bank

1. The average propensity to consume is commonly viewed as a key determinant of standard of living.

2. Financial planning can improve your standard of living.

3. Standard of living is defined as the necessities, comforts, and luxuries desired by an individual or a family.

4. Personal financial plans help individuals have the same standard of living across the country.

5. The most effective way to achieve financial objectives is through personal financial planning.

6. Two persons with significantly different income can have equal average propensities to consume because of differences in their standards of living.

7. Mike’s annual income is $35,000, and he spends $30,800 for current needs. Mike’s average propensity to consume is 80%.

8. Tangible assets are earning assets that are held for the returns they promise.

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.

10. The need for financial planning declines as your income increases.

11. A good financial plan is completed when one is in his or her 30s and will typically last a lifetime.

12. Saving $3,000 for a large, flat-screen TV within the next 6 years is an example of a short-term goal.

13. Short-term planning should include creating and maintaining an emergency fund with six to nine months’ worth of income.

14. It is not good to discuss your financial goals and attitudes toward money with your partner.

15. For employees of large firms, managing employee benefits is an important part of financial planning.

16. Accumulating wealth for later years is called estate planning.

17. The longer you wait to begin retirement planning, the less you are likely to have in your retirement fund.

18. Tax plans are closely tied to investment plans.