CH02 Test - Scantron

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					Personal Financial Literacy
Chapter 2 Test                                                                                           1


Indicate whether the statement is true or false by marking A for True or B for False on the Scantron.

  1. Some states have minimum wage laws that set a higher rate than the federal minimum wage rate.

  2. Salaried workers usually do not keep time cards or count hours worked.

  3. Networking is the process of making contacts and building relationships with other people.

  4. Owning a small business involves hard work but very little risk.

  5. Vacation days, holidays, and sick leave days are examples of pay without work.

  6. Perks are benefits that have high monetary value to employees of large companies.

  7. Group health insurance premiums are typically lower than premiums for individual policies.

  8. A health flexible spending arrangement allows employees to set aside money to pay for qualified
     medical expenses.

  9. Interest income is a form of unearned income.

10. Medicaid is a program of medical insurance that is provided for all retired Americans.

11. Excise taxes are charged on the purchase of specific goods, such as gasoline, cigarettes, and

12. Not everyone benefits from government goods and services that are paid for with tax dollars.

13. Taxes and payments for other items are subtracted from a worker’s gross pay to calculate net pay.

14. The more exemptions a worker claims, the less tax is withheld from his or her paycheck.

15. Form W-2 is used by employees to list their exemptions and determine tax withholdings from their


Mark the letter of the choice that best completes the statement or answers the question on the Scantron.

16. A simple federal tax return form designed for use by single and joint filers with no dependents is
    a. Form 1040
    b. Form 1040A
    c. Form 1040EZ
    d. Schedule A
Personal Financial Literacy
Chapter 2 Test                                                                               2

17. Overtime pay for hours worked above 40 hours in 1 week must be at least
    a. the regular pay rate
    b. 1 1/2 times the regular rate
    c. twice the regular rate
    d. none of the above

18. A percentage of a sale paid to the salesperson is called a
    a. tip
    b. salary
    c. wage
    d. commission

19. The amount left after all costs are deducted from the income of a business is called
    a. wages
    b. tips
    c. profit
    d. interest earnings

20. A benefit often received by full-time workers is
    a. health insurance
    b. sick leave pay
    c. vacation pay
    d. all of the above

21. Programs that reimburse employees for education costs
    a. do not help prepare a worker for promotions
    b. can benefit the company because the worker has better skills
    c. are a guaranteed benefit for all workers
    d. none of the above

22. Workers’ compensation insurance
    a. pays medical and disability benefits to workers who are injured on the job
    b. laws are set by the federal government and do not vary by state
    c. may pay benefits to a worker’s family if the worker is killed on the job
    d. both a and c

23. Dividends are
    a. money shared with stockholders when a corporation makes profits
    b. a type of wages
    c. a form of unearned income
    d. both a and c

24. Money and benefits people receive from local, state, or federal governments are called
    a. excise taxes
    b. transfer payments
    c. unearned income
    d. disposable income
Personal Financial Literacy
Chapter 2 Test                                                                                         3

25. Which of the items listed is an in-kind transfer payment?
    a. food stamps
    b. Social Security benefits
    c. workers’ compensation
    d. unemployment compensation

26. Insurance that provides payments to replace income lost when illness or injury (not job-related)
    prevents an employee from working is called
    a. life insurance
    b. disability insurance
    c. workers’ compensation
    d. health insurance

27. Which of the items listed is a required deduction from a worker’s paycheck?
    a. health insurance premiums
    b. federal income tax
    c. savings plans
    d. group life insurance premiums

28. Which form do workers complete so an employer can verify that they are eligible for employment?
    a. Form W-2
    b. Form W-4
    c. Form I-9
    d. none of the above

29. Social Security tax
    a. is withheld by state governments
    b. provides a system of old-age, survivors, and disability insurance
    c. has the same rate from year to year
    d. both a and b

30. Which of the items listed is an optional deduction from a worker’s paycheck?
    a. federal income tax
    b. Social Security tax
    c. state income tax
    d. retirement plan contributions

                   Turn the page. You are NOT finished yet.
Personal Financial Literacy
Chapter 2 Test                                                                                            4


Match each term with the correct definition or description below. Mark the letter(s) of the term on the

  a.   benefits
  b.   cafeteria plan
  c.   disposable income
  d.   entrepreneur
  e.   paid holidays
 ab.   personal leave
 ac.   sick leave
 ad.   tax
 ae.   transfer payments
 bc.   unearned income

31. A business owner who takes the risk of owning and operating a business

32. Money a person has left over to spend or save after taxes have been paid

33. Days a worker is paid for working but does not actually work, such as Memorial Day or Veterans

34. Money or benefits received from government without working for them

35. Forms of pay for a job other than salary or wages, such as vacation days and holidays

36. Money received from sources other than working in a job

37. A required payment for the support of a government

38. A benefits package that allows employees to select the options they want from a number of choices

39. Days for which a worker is paid even though she or he is absent from work for personal reasons

40. Days for which a worker is paid even though he or she did not work due to illness

                           DO NOT write or mark on this test.

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