Module 04 Quiz

1. Which of the following is generally a good reason to go into debt? Choose all that apply.
   • to invest into increases in future productivity
   • to increase current consumption
   • to invest into reducing future costs
   • to spite your future self
2. If you are saving 25% of your after-tax income, how many years will it take to save up for one year's worth of expenses? Ignore possible investment returns.
3. Unwise Uma borrowed $1000 at some positive interest rate for present consumption, which did not result in increases in future income. This debt needs to be repaid sometime over the next 5 years.

   What is the net effect of this debt on the average annual consumable income for Uma over the next 5 years?

   • goes up by at least $100 on average
   • no effect
   • goes down by at least $200 per year on average
   • goes down by at least $300 on average
4. True or False: Federal and state taxes can significantly reduce your net take-home pay.
5. Which of the following is the largest expense category in the average US household budget?
   • food
   • healthcare
   • transportation
   • housing
6. Which of the following is the first step in the budgeting process?
   • use a spreadsheet to create an explicit budget
   • collect information on your current spending patterns
   • determine in which categories to decrease your discretionary expenditures
   • compare your spending with your stated budgetary goals