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Eco 04

True/False
Indicate whether the sentence or statement is true or false.
 

1. 

A history of late payments does not affect a person's credit rating.
 

2. 

A person with collateral is a good credit risk.
 

3. 

A co-signer is a person who agrees to repay a loan if the borrower does not.
 

4. 

An unsecured loan does not have to be repaid in a certain amount of time.
 

5. 

If consumers do not pay their debts, lending institutions lower their interest rates to make loans more available.
 

6. 

Government regulation of credit ensures that people can borrow as much money as they want.
 

7. 

An interest ceiling is the maximum rate of interest that can be charged.
 

8. 

A bank cannot refuse to lend money on the basis of a person's race.
 

9. 

A person who declares bankruptcy does not have to pay taxes.
 

10. 

Credit records are public information.
 

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

11. 

Anytime you receive credit, you are
a.
going into debt.
c.
lowering the cost of an item.
b.
earning interest on borrowed money.
d.
increasing the value of an item.
 

12. 

Which of the following are durable goods?
a.
groceries
c.
cosmetics
b.
refrigerators
d.
concert tickets
 

13. 

The largest installment debt in the United States is money people owe
a.
on cars.
c.
on clothes.
b.
on home mortgages.
d.
on appliances.
 

14. 

Increasing the amount of time it takes to repay a loan
a.
increases the size of monthly payments.
b.
decreases the amount of the loan.
c.
decreases the number of payments.
d.
increases the total interest charges.
 

15. 

The benefit of using credit is
a.
paying lower prices for expensive durable goods.
b.
being able to buy and enjoy a good or service now rather than later.
c.
not going into debt to buy things you want.
d.
paying interest on borrowed funds.
 

16. 

Which of the following types of financial institutions controls the most money and offers the widest range of services?
a.
savings and loan
c.
commercial bank
b.
finance company
d.
savings bank
 

17. 

Which type of financial institution is owned and operated by its members?
a.
credit union
c.
savings and loan
b.
consumer finance company
d.
commercial bank
 

18. 

The maximum amount of goods and services a person can buy on the promise to pay in the future is the
a.
finance charge.
c.
credit limit.
b.
annual percentage rate.
d.
credit card.
 

19. 

To determine which creditor is charging the most for credit, a consumer should compare
a.
finance charges.
c.
monthly payments.
b.
annual percentage rates.
d.
length of the credit agreements.
 

20. 

A method of payment that enables customers to transfer funds electronically from their bank to a place where they purchase goods is a
a.
regular charge account.
c.
credit card.
b.
revolving charge account.
d.
debit card.
 

21. 

Your credit rating affects your ability to
a.
obtain a loan.
c.
save money.
b.
get a job.
d.
get an education.
 

22. 

Which of the following factors might affect a person's capacity to pay back a loan?
a.
other large debts
b.
involvement in community organizations
c.
educational background
d.
problems with the law
 

23. 

Which of the following could be used as collateral?
a.
credit card
c.
job
b.
current debts
d.
car
 

24. 

A financial institution might provide an unsecured loan to a
a.
young person who recently started a new job.
b.
person with many debts.
c.
person who is unemployed.
d.
person who has been working at a job for several years.
 

25. 

A person who has lost control of debt should
a.
make minimum payments on credit cards.
b.
concentrate on paying the high-interest credit cards first.
c.
borrow additional money to pay off existing debt.
d.
get someone to co-sign the loans.
 

26. 

The credit industry is regulated by
a.
only the federal government.
c.
only state governments.
b.
both federal and state governments.
d.
financial institutions.
 

27. 

Which one of the following laws made it illegal to deny credit on the basis of race, religion, national origin, gender, marital status, or age?
a.
Truth in Lending Act
c.
Equal Credit Opportunity Act
b.
Fair Credit Reporting Act
d.
Fair Credit Billing Act
 

28. 

One disadvantage of an interest ceiling is
a.
interest rates will not rise above 10 percent.
b.
a surplus of credit may result.
c.
a shortage of credit may result.
d.
consumers with poor credit become riskier.
 

29. 

Debtors who declare bankruptcy must
a.
go to jail.
c.
pay higher interest rates.
b.
give up most of what they own.
d.
pay lower interest rates.
 

30. 

How does bankruptcy affect creditors?
a.
they are not paid off in full
c.
they must charge lower interest
b.
they are immediately repaid
d.
they must raise interest rates
 

Completion
Complete each sentence or statement.
 

31. 

A ____________________ is an installment debt owed on real property.
 

 

32. 

Automobiles, appliances, and furniture are examples of ____________________.
 

 

33. 

A borrower can decrease the total ____________________ a lender charges by repaying a loan in a shorter period of time.
 

 

34. 

Consumers normally purchase durable goods with ____________________.
 

 

35. 

The amount of money a consumer originally borrowed is the ____________________.
 

 

36. 

A ____________________ allows a consumer to buy goods and services from the company that extends the credit.
 

 

37. 

The cost of credit expressed monthly in dollars and cents is the ____________________.
 

 

38. 

____________________ take over contracts for installment debts and add a fee for collecting the debt.
 

 

39. 

____________________ control the largest amount of money and offer the widest range of services.
 

 

40. 

A ____________________ allows a consumer to buy goods and services at many kinds of businesses.
 

 

Matching
 
 
Match each item with the correct statement below.
a.
credit
b.
principal
c.
interest
d.
durable goods
e.
mortgage
 

41. 

manufactured items that have a life span longer than three years
 

42. 

amount of money a borrower must pay for the use of someone else's money
 

43. 

installment debt owed on houses, buildings, or land
 

44. 

amount of money originally borrowed in a loan
 

45. 

receipt of money to buy goods and services in the present with the promise to pay for them in the future
 
 
Match each item with the correct statement below.
a.
savings and loan
b.
charge account
c.
credit card
d.
finance charge
e.
annual percentage rate
 

46. 

a credit device that allows a person to make purchases without paying cash
 

47. 

cost of credit expressed monthly in dollars and cents
 

48. 

depository institution that accepts deposits and lends money
 

49. 

cost of credit expressed as a yearly percentage
 

50. 

credit from a particular company allowing consumers to buy goods and pay for them later
 
 
Match each item with the correct statement below.
a.
credit check
b.
credit rating
c.
collateral
d.
secured loan
e.
unsecured loan
 

51. 

something of value that a borrower lets the lender claim if a loan is not repaid
 

52. 

estimation of the risk involved in lending money to a person or business
 

53. 

investigation of a person's income, current debts, personal life, and past history of repaying debts
 

54. 

loan guaranteed only by a promise to repay it
 

55. 

loan that is backed up by collateral
 
 
Match each item to the correct statement below.
a.
usury law
b.
bankruptcy
c.
Truth in Lending Act
d.
Equal Credit Opportunity Act
e.
Fair Credit Reporting Act
 

56. 

inability to pay debts based on income received
 

57. 

ensures that consumers are informed about the costs and conditions of borrowing
 

58. 

protects the privacy of information in a credit check
 

59. 

restricts the amount of interest that can be charged for credit
 

60. 

prohibits discrimination in giving credit
 



 
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