CFEE - TEST OF ECONOMIC AND FINANCIAL CAPABILITY Survey

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* 1. What is the cheapest way to make a purchase?

(a) use cash

(b) use a debit card if you don’t have to pay a fee

(d) any one of the above

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* 2. When you pay interest to borrow money from a bank, the interest you pay is used to cover the bank’s:

(a) service fees and costs of doing business

(b) the money it lends to you plus profit

(d) all of the above

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* 3. If Jon pays a higher rate of interest rate than Maria does for the same loan, it is likely that:

(a) Jon has the better credit rating

(b) Maria has the better credit rating

(d) Maria has made more late payments on her debts than Jon

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* 4. What is the most common reason for an individual to take out a consolidation loan?

(a) pay for a house

(b) get out of bankruptcy

(d) combine debts into one payment

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* 5. Which of the following can hurt your credit rating?

(a) making late payments on loans and debts

(b) staying in one job too long

(d) using your credit card frequently for purchases

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* 6. If you want to pay your mortgage off more quickly, you can:

(a) make more frequent payments

(b) choose to pay a higher interest rate

(d) increase the amortization period for your mortgage

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* 7. Which of the following helps to manage a credit card wisely?

(a) only pay the minimum balance required

(b) have a number of different credit cards to share the debt

(d) check credit card statements every six months

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* 8. The amount of interest you pay on a loan is affected by:

(a) your credit rating

(b) how much you borrow

(d) all of the above

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* 9. Which of the following is NOT a benefit of making a purchase with a credit card?

(a) it can help establish a better credit rating for younger borrowers

(b) it creates a record of the things that you bought

(d) no fees are charged so long as the debt is paid off within three months

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* 10. If interest rates rise, for which type of mortgage will monthly costs rise?

(a) fixed mortgage

(b) variable mortgage

(d) neither – mortgage costs are set for the term of the mortgage

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* 11. Which of the following will help lower the total cost of a house?

(a) paying off the mortgage over a longer period of time

(b) agreeing to pay the current rate of interest on the mortgage for as many years as possible

(d) making monthly payments rather than payments every two weeks

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* 12. Which of the following is NOT a benefit of investing in a mutual fund?

(a) makes it easier for smaller investors to diversity

(b) investments are managed by professionals

(d) mutual funds can be easily bought and sold

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* 13. What does the “magic of compounding mean?”

(a) you can benefit from combining a group of investments

(b) savings build by earning interest on interest

(d) you can save money by combining credit card debts together

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* 14. If you were to save $1,000 for a year at an interest rate of 2% and over that year the rate of inflation was 2.5%, what impact would this have on your savings?

(a) value of savings would increase by 4.5%

(b) value of savings would increase by 2%

(d) value of savings would fall by .5%

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* 15. Which of the following investments would likely involve the greatest amount of risk?

(a) investing in an individual stock

(b) investing in a mutual fund

(d) investing in a bond

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* 16. Which of the following won’t likely help you build up your savings?

(a) automatic payroll deductions

(b) working with a budget

(d) rising interest rates on debts

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* 17. Which of the following changes is likely to help reduce future inflation in the economy?

(a) lower interest rates

(b) higher interest rates

(d) raising tariffs on the products we import

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* 18. An increase in “real wages” refers to an increase in:

(a) wages after taxes have been taken out

(b) wages after inflation has been taken out

(d) wages that one can actually spend

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* 19. When are you more likely to be better off?

(a) when your wages rise by more than the rate of inflation

(b) when your wages rise by less than the rate of inflation

(d) when your wages and inflation rise by the same amount

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* 20. Which deduction is not common for the paycheques of most employees?

(a) contribution to company’s designated charity

(b) Canada Pension Plan

(d) company insurance and/or health care plan

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* 21. Who owns the major banks?

(a) the federal government

(b) the provincial governments

(d) shareholders

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* 22. What impact would an increase in interest rates from 3 per cent to 5 per cent likely have on the economy?

(a) more spending in the economy

(b) less spending in the economy

(d) more borrowing by consumers

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* 23. When the federal government spends more money in a given year than it receives, what do we call the difference?

(a) a national debt

(b) a budget deficit

(d) a national surplus

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* 24. When the federal government spends more money in a given year than it receives, how can it get money to cover the difference?

(a) sell bonds

(b) buy gold

(d) buy bonds

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* 25. What is one of the primary roles of our central bank – The Bank of Canada?

(a) to control competition among banks in Canada

(b) to direct the operations of the banks and keep a watch on their profits

(d) to help maintain stable prices and protect the value of money

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* 26. When is the deadline for filing personal income tax returns in Canada?

(a) December 31

(b) April 30

(d) Deadlines differ across the country

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* 27. Which of the following is not a type of tax paid by Canadians?

(a) income tax

(b) goods and services tax

(d) capital gains tax

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* 28. What is the approximate annual maximum amount that the Canada Pension Plan will provide to a Canadian retiring at age 65 as of 2018?

(a) $14,000

(b) $24,000

(d) $44,000

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* 29. Which of the following would best describe the term “sustainable development”?

(a) ensuring that economic activity does not damage the environment

(b) helping developing countries to improve economic growth over time

(d) maintaining economic growth for our economy in the future

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* 30. What is the likely impact of a rise in the value of our currency in terms of the currencies of other countries?

(a) our exports become more expensive for other countries to buy

(b) our imports from other countries become more expensive

(d) visitors from other countries will find it less expensive when they travel in our country