FBLA Economics and Personal Finance 1 — Questions and Answers
Question 1: What does the term 'opportunity cost' mean in economics?
- The price of a product plus taxes
- The value of the next best alternative foregone (Correct answer)
- The total cost of producing one unit
- The fee charged by a financial advisor
Correct answer: The value of the next best alternative foregone
Opportunity cost is the value of the next best option you give up when making a choice.
Question 2: Which of the following best describes a 'budget surplus'?
- Spending exceeds income
- Income equals spending
- Income exceeds spending (Correct answer)
- Debt exceeds assets
Correct answer: Income exceeds spending
A budget surplus occurs when revenue or income is greater than expenditures during a given period.
Question 3: What is the primary function of the Federal Reserve in the United States?
- Collect federal taxes
- Manage the nation's monetary policy (Correct answer)
- Regulate state banks only
- Issue U.S. passports
Correct answer: Manage the nation's monetary policy
The Federal Reserve manages monetary policy, including controlling the money supply and setting interest rates.
Question 4: What is 'inflation'?
- A decrease in the money supply
- A general rise in price levels over time (Correct answer)
- An increase in consumer savings
- A drop in unemployment rates
Correct answer: A general rise in price levels over time
Inflation refers to the sustained increase in the general price level of goods and services in an economy.
Question 5: Which financial document shows a person's assets, liabilities, and net worth at a specific point in time?
- Income statement
- Cash flow statement
- Balance sheet (net worth statement) (Correct answer)
- Tax return
Correct answer: Balance sheet (net worth statement)
A personal balance sheet, or net worth statement, captures assets minus liabilities to show financial health at a given date.
Question 6: What is a 'credit score' primarily used for?
- Measuring a business's profitability
- Assessing an individual's creditworthiness (Correct answer)
- Calculating income tax owed
- Determining insurance premiums only
Correct answer: Assessing an individual's creditworthiness
A credit score reflects a person's credit history and is used by lenders to evaluate the risk of extending credit.
FBLA Economics and Personal Finance 1
What does the term 'opportunity cost' mean in economics?