Statement Based – SMART WAYS TO MANAGE YOUR FINANCES

CBSE Class 9 Economics-English Medium / By /

Common Options for Every Question

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

TOPIC 1: PERSONAL FINANCIAL MANAGEMENT

Q1.

Riya receives a fixed monthly allowance and wants to save for a laptop.

Consider the following statements:

  1. Planning her income and expenditure can help her control unnecessary spending.
  2. Setting a financial goal can help guide her saving decisions.
  3. Personal financial management is concerned only with buying investments.
  4. A financial plan requires spending the entire income every month.

Which of the above statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q2.

Aman earns money from part-time work and wants to manage it responsibly.

  1. PFM can include planning income, expenditure, saving and investment.
  2. Financial goals are useful only for people with very high incomes.
  3. Setting a saving target can help a person decide how much to reserve.
  4. Personal financial management deals only with taxation.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q3.

Meena notices that she frequently spends money on unnecessary items.

  1. Tracking expenditure can help her identify unnecessary spending.
  2. PFM requires every person to invest in shares.
  3. Financial planning can help balance present needs with future goals.
  4. Saving has no role in personal financial management.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q4.

Rahul wants to prepare himself financially for unexpected expenses.

  1. An emergency fund can help meet certain unexpected expenses.
  2. PFM can help a person prioritise important financial needs.
  3. An emergency fund guarantees that unexpected events will never occur.
  4. Financial planning can help reduce dependence on unnecessary borrowing.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q5.

Neha’s income has increased, but she still finds it difficult to save.

  1. Higher income automatically guarantees good financial management.
  2. Controlling expenditure is an important part of PFM.
  3. Saving can be planned even when income is limited.
  4. Financial goals are useful only for businesses.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q6.

Arjun wants to buy a bicycle after six months and plans his spending accordingly.

  1. A specific financial goal can influence saving decisions.
  2. PFM deals only with present consumption.
  3. Planning expenditure can help Arjun reserve money for his goal.
  4. Reviewing actual expenditure can help improve financial management.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q7.

Sana receives irregular income and wants to manage her money carefully.

  1. PFM can help her prepare for periods of lower income.
  2. Financial management means that all leisure spending must be eliminated.
  3. Tracking expenses can help her identify spending priorities.
  4. Saving can provide support for future financial needs.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q8.

Kabir compares his monthly income with his expenditure.

  1. PFM is concerned only with paying taxes.
  2. If planned expenditure exceeds income, he may need to adjust his plan.
  3. Financial planning can help him make informed decisions about money.
  4. Saving can be included in a personal financial plan.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q9.

Priya wants to become financially independent in the future.

  1. Long-term financial goals can guide saving and investment decisions.
  2. Financial planning has no connection with spending habits.
  3. Reviewing financial decisions can help a person adjust to changing circumstances.
  4. PFM means spending all available income immediately.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q10.

Dev wants to improve his financial habits.

  1. Recording expenditure can help him understand where his money goes.
  2. A financial plan should never be changed.
  3. Saving for future needs can be part of responsible financial management.
  4. PFM can help a person make decisions according to financial priorities.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

TOPIC 2: INFLATION AND PURCHASING POWER

Q11.

Prices of several commonly purchased goods rise while Ravi’s income remains unchanged.

  1. Ravi may be able to buy fewer goods with the same amount of money.
  2. Inflation can reduce the purchasing power of money.
  3. Inflation means that every individual product must have exactly the same price.
  4. A broad rise in prices can affect household financial planning.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q12.

A family’s income rises, but prices rise faster than the family’s income.

  1. The family’s purchasing power may decline.
  2. Purchasing power depends only on the amount printed on a currency note.
  3. Purchasing power refers to the quantity of goods and services that money can buy.
  4. Inflation can influence household budgeting.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q13.

The price of one vegetable rises sharply, while prices of most other goods remain broadly stable.

  1. A rise in the price of one product alone does not necessarily mean general inflation.
  2. Inflation refers to a sustained rise in the general price level.
  3. Any increase in the price of any single product is automatically inflation.
  4. Inflation can reduce the purchasing power of money.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q14.

₹1,000 previously bought a particular basket of goods, but now the same money buys less.

  1. The purchasing power of ₹1,000 has increased.
  2. Rising prices can reduce the quantity of goods that the same amount of money can buy.
  3. Inflation has no effect on household decisions.
  4. Changes in prices can require families to reconsider their budgets.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q15.

An elderly person receives a fixed monthly amount while prices of essential goods rise.

  1. If income remains unchanged while prices rise, purchasing power may fall.
  2. Inflation can make it difficult to maintain the same consumption pattern.
  3. Inflation always increases the real value of fixed income.
  4. Careful budgeting can become more important when prices rise.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q16.

A family’s usual monthly budget is no longer sufficient for some regular expenses.

  1. Rising prices can affect the family’s purchasing power.
  2. Inflation always means that nominal income has fallen.
  3. The family may need to reconsider its spending priorities.
  4. Changes in the general price level can influence financial planning.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q17.

A person keeps a fixed amount of cash savings for several years while prices rise.

  1. The nominal amount of money can remain unchanged.
  2. Purchasing power is completely independent of price changes.
  3. Rising prices can reduce what the saved amount can purchase.
  4. Inflation is relevant when considering the future purchasing power of money.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q18.

A family changes its shopping choices after observing a broad increase in prices.

  1. Inflation cannot influence household spending decisions.
  2. The family may prioritise necessities over less essential purchases.
  3. A rise in the general price level can reduce purchasing power.
  4. Budgeting can help households respond to changing prices.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q19.

A worker receives a salary increase, but the cost of living rises considerably.

  1. The worker’s nominal income has increased.
  2. Purchasing power must necessarily increase by exactly the same proportion.
  3. Real purchasing ability depends partly on how prices have changed.
  4. Inflation makes it important to consider more than just the amount of nominal income.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q20.

A student says, “I still have ₹500, so my ability to buy things must be unchanged.”

  1. The numerical amount of money has remained unchanged.
  2. Purchasing power can change when prices change.
  3. Purchasing power is determined only by the printed value of the currency.
  4. Inflation is one factor that can reduce purchasing power.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

TOPIC 3: SIMPLE AND COMPOUND INTEREST

Q21.

Aarav deposits money under a simple-interest arrangement.

  1. Simple interest is calculated on the original principal.
  2. Under simple interest, previously earned interest is not normally added to the principal for calculating later interest.
  3. Simple interest is always calculated on accumulated interest.
  4. The amount of simple interest depends on principal, rate and time.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q22.

Riya compares simple interest with compound interest.

  1. Compound interest can involve earning interest on previously accumulated interest.
  2. Simple interest is necessarily calculated on accumulated interest.
  3. The effect of compounding can become more significant over time.
  4. The frequency of compounding can affect the final amount.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q23.

Two students borrow money under different interest arrangements.

  1. Simple interest can be calculated using principal, rate and time.
  2. Simple interest is always greater than compound interest.
  3. Changing the principal can change the amount of simple interest.
  4. A borrower should understand the interest method before comparing financial arrangements.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q24.

A bank account uses compound interest.

  1. Compound interest ignores previously earned interest.
  2. Previously earned interest may become part of the amount on which future interest is calculated.
  3. Compound interest can produce faster growth than simple interest when relevant conditions are comparable.
  4. Time can influence the effect of compounding.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q25.

Meera is checking the effect of changing the principal, rate and time under simple interest.

  1. If the principal doubles while rate and time remain unchanged, simple interest doubles.
  2. Simple interest is independent of the interest rate.
  3. A higher simple-interest rate, with other factors unchanged, gives greater interest.
  4. A longer period, with principal and rate unchanged, gives greater simple interest.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q26.

A student is trying to understand compound interest.

  1. Compound interest can involve interest being calculated on previously accumulated interest.
  2. Simple and compound interest are identical in all situations.
  3. The compounding process can increase the growth of money over time.
  4. The frequency of compounding can affect the final amount.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q27.

Sameer compares two loans before choosing one.

  1. He should check whether the interest is simple or compound.
  2. The method of interest calculation can affect the amount payable.
  3. The principal has no relevance to interest calculations.
  4. The time period can affect total interest.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q28.

A savings account compounds interest periodically.

  1. Interest credited earlier can become part of the balance used for future calculations.
  2. Compound interest never uses accumulated interest.
  3. The balance can build upon earlier interest through compounding.
  4. Understanding compounding can help a saver compare financial products.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q29.

A student wants to compare the effect of saving for different periods.

  1. Under simple interest, increasing time while other factors remain unchanged increases total interest.
  2. Time has no role in simple-interest calculations.
  3. Under compound interest, accumulated interest can contribute to future interest calculations.
  4. Comparing financial products requires attention to their interest terms.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q30.

A family compares two financial products.

  1. The advertised interest rate is the only factor that matters.
  2. Simple interest is based on the original principal.
  3. Compound interest can involve previously accumulated interest.
  4. The time period is relevant when evaluating interest earnings or costs.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

TOPIC 4: BUDGETING

Q31.

Ananya prepares a monthly financial plan.

  1. A budget can help plan expected income and expenditure.
  2. A budget can help determine whether planned spending is affordable.
  3. A budget guarantees that unexpected expenses will never occur.
  4. Comparing planned and actual expenditure can help improve future budgets.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q32.

Rohit wants to control unnecessary spending.

  1. Recording expenses can help identify spending patterns.
  2. Budgeting means that all leisure expenditure must be eliminated.
  3. A budget can help allocate money to important needs.
  4. A budget can support a planned savings goal.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q33.

A family’s planned expenditure is greater than its expected income.

  1. The family may need to reconsider some planned expenses.
  2. A budget is useful only when income is greater than expenditure.
  3. The family can reconsider its financial priorities.
  4. A planned deficit may signal the need for adjustment.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q34.

Kavya wants to save a fixed amount every month.

  1. Savings can be included as a planned part of her budget.
  2. A budget should be based only on wishes rather than expected income.
  3. Tracking actual expenditure can show whether she is following the plan.
  4. A budget can be revised when circumstances change.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q35.

A student receives ₹2,000 and wants to use it wisely.

  1. He should consider needs, savings and priorities before allocating the money.
  2. Budgeting can help distinguish essential from non-essential expenditure.
  3. A budget requires spending the entire income.
  4. Planned savings can help meet future goals.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q36.

Vikram’s actual spending differs from his monthly budget.

  1. He can compare actual spending with planned spending.
  2. Any difference proves that the budget was useless.
  3. He can use the information to adjust future spending.
  4. Reviewing a budget can improve future financial decisions.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q37.

A family wants to avoid unnecessary borrowing.

  1. Planning expenditure can help control spending.
  2. Budgeting guarantees that borrowing will never be necessary.
  3. An emergency provision can help when unexpected expenses occur.
  4. A budget can help identify periods when expenditure may exceed income.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q38.

Neha receives an unexpected bonus.

  1. She should spend the entire bonus immediately.
  2. She can consider future financial goals before deciding how to use it.
  3. Some of the additional money may be allocated towards savings.
  4. Financial planning can help reduce impulsive spending.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q39.

Arjun’s monthly expenses are close to his income.

  1. Tracking expenditure can help identify areas where spending can be controlled.
  2. A budget can help decide which expenses are priorities.
  3. Having a budget means the plan can never be changed.
  4. Building savings can improve preparedness for future needs.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q40.

A family prepares an annual financial plan.

  1. A budget can eliminate all financial uncertainty.
  2. Expected income and expenditure should be considered.
  3. The family can use the budget to set financial priorities.
  4. Periodic review can make the budget more realistic.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

TOPIC 5: SAVINGS AND INVESTMENT OPTIONS

Q41.

Rahul is deciding where to place his savings.

  1. Different financial products can have different levels of risk.
  2. Stocks can experience changes in market value.
  3. Every investment guarantees a positive return.
  4. Risk should be considered before choosing an investment.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q42.

Priya compares a fixed deposit with stocks.

  1. A fixed deposit generally provides interest according to specified terms.
  2. Stocks always provide a fixed return.
  3. The market value of stocks can rise or fall.
  4. Fixed deposits and stocks can differ in risk and return characteristics.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q43.

A family wants to avoid putting all its money into one investment.

  1. Diversification can reduce dependence on one investment.
  2. Mutual funds can pool money from different investors.
  3. Diversification guarantees that no loss can ever occur.
  4. Investors should consider financial goals and risk before investing.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q44.

Aman is considering bonds.

  1. A bond generally represents lending money to an issuer.
  2. Bonds can have terms relating to interest payments and repayment of principal.
  3. Bonds are completely free from all forms of risk.
  4. An investor should understand the terms before investing.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q45.

Meera is comparing different saving and investment choices.

  1. A fixed deposit is always identical to every other fixed deposit.
  2. Market-linked investments can experience changes in value.
  3. A fixed deposit generally provides interest according to specified terms.
  4. Investors should consider liquidity, risk and financial goals.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q46.

A student wants to understand mutual funds.

  1. Mutual funds can pool money from several investors.
  2. Mutual funds eliminate all investment risk.
  3. The pooled money is invested according to the fund’s objectives.
  4. The level of risk depends partly on the assets and strategy involved.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q47.

A young investor has a long-term financial goal.

  1. The time available before the goal is relevant when choosing an investment.
  2. Every long-term goal must be funded only through stocks.
  3. Risk tolerance is relevant when selecting an investment.
  4. Financial goals should be considered when selecting investment options.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q48.

Rohan says, “Stocks are better because their prices can rise.”

  1. Stocks can never lose value.
  2. Some investments with higher possible returns may also involve higher risk.
  3. Past performance does not guarantee future returns.
  4. An investor should consider both risk and possible return.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q49.

A family wants money for emergencies as well as a long-term investment.

  1. Emergency money may need to be readily accessible.
  2. Investment choices should reflect the purpose and time horizon of money.
  3. All investments have exactly the same liquidity.
  4. Risk and possible return should both be considered.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q50.

A student compares fixed deposits, stocks, bonds and mutual funds.

  1. All these products have exactly the same risk and return characteristics.
  2. These products can differ in risk, return and liquidity.
  3. Understanding an investment product before investing is important.
  4. Financial goals should be considered when choosing an investment.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

TOPIC 6: RISK AND INSURANCE

Q51.

A family wants protection against a specified financial risk.

  1. Insurance can help manage specified risks covered by a policy.
  2. Insurance generally involves paying a premium for coverage under policy terms.
  3. Insurance guarantees that the insured event will never happen.
  4. Policy coverage and exclusions should be understood before buying insurance.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q52.

Rohan buys an insurance policy without reading its terms.

  1. He may fail to understand what risks are covered.
  2. Every insurance policy covers every possible loss.
  3. Policy conditions can determine whether a claim is covered.
  4. Understanding policy terms can help a person make an informed decision.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q53.

A family wants to manage a financial risk.

  1. Insurance can help manage certain financial risks.
  2. Insurance is unnecessary because unexpected events are uncertain.
  3. A premium is generally paid for insurance coverage.
  4. The type of insurance should match the risk a person wants to manage.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q54.

Two insurance policies have different premiums and coverage.

  1. A higher premium does not automatically make a policy suitable for everyone.
  2. Insurance completely eliminates every financial risk.
  3. Coverage, exclusions and conditions should be considered.
  4. Comparing policies can help a person make an informed choice.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q55.

A student says, “Insurance prevents accidents from occurring.”

  1. Insurance generally does not prevent the insured event itself.
  2. Insurance can provide financial protection against specified covered losses.
  3. Insurance guarantees that no financial loss can ever occur.
  4. The benefit available under insurance depends on policy terms.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q56.

A person identifies the risks relevant to his circumstances before buying insurance.

  1. Identifying the risk can help in choosing suitable insurance.
  2. Insurance decisions are unrelated to financial risk.
  3. The premium is one factor that should be considered.
  4. Policy coverage should be checked before making a decision.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q57.

A family is deciding whether insurance is appropriate for a particular risk.

  1. They should consider the possible financial impact of the risk.
  2. Insurance should always be chosen solely on the basis of the lowest premium.
  3. Policy terms determine the extent of coverage.
  4. Insurance can be one part of broader financial risk management.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q58.

A person makes a claim under an insurance policy.

  1. Every claim is automatically accepted once insurance has been purchased.
  2. The claim may be considered according to the policy’s terms and conditions.
  3. Exclusions can affect whether a loss is covered.
  4. Required information or documents may be important for processing a claim.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q59.

A student is learning why people buy insurance.

  1. Insurance is exactly the same as saving money for a future purchase.
  2. Insurance can reduce the financial burden associated with specified covered risks.
  3. A policyholder generally pays a premium for coverage.
  4. Different insurance products can address different risks.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q60.

A family reviews its insurance needs after its circumstances change.

  1. Insurance needs can never change once a policy is purchased.
  2. Changes in financial circumstances can make a review useful.
  3. The family can check whether its coverage still matches relevant risks.
  4. Reviewing policy terms can help identify exclusions or conditions.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

TOPIC 7: PERSONAL INCOME TAX

Q61.

Arjun wants to understand his tax responsibilities.

  1. Income tax is a compulsory levy imposed under applicable tax laws.
  2. Taxes contribute to government revenue.
  3. Income tax is a voluntary payment made only when a person wishes to contribute.
  4. Tax responsibilities depend on applicable laws and circumstances.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q62.

A student says, “Everyone must pay exactly the same amount of income tax.”

  1. Tax liability can depend on applicable tax rules and income circumstances.
  2. Income tax is unrelated to income.
  3. Tax laws determine how tax obligations are calculated.
  4. Taxpayers should consider applicable rules rather than assuming identical liability.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q63.

A person keeps proper records of his income and financial transactions.

  1. Keeping records can support financial and tax-related planning.
  2. Tax rules never change, so checking applicable rules is unnecessary.
  3. Legal tax planning should be based on applicable tax laws.
  4. Understanding tax obligations can be part of responsible financial management.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q64.

A person is preparing a personal financial plan.

  1. Tax payments can affect the income available for spending and saving.
  2. Income tax should be ignored while planning personal finances.
  3. Understanding applicable tax rules can support responsible planning.
  4. Following applicable tax requirements is part of responsible financial behaviour.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q65.

A person wants to reduce his tax burden legally.

  1. He should understand the applicable tax rules.
  2. Hiding income is an acceptable method of tax planning.
  3. Legal tax planning must remain within the requirements of tax law.
  4. Keeping appropriate records can support responsible compliance.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q66.

A student is learning why governments collect taxes.

  1. Taxes are an important source of government revenue.
  2. Income tax is imposed according to applicable tax laws.
  3. Tax collection has no connection with government revenue.
  4. Tax laws establish obligations that taxpayers must follow.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q67.

A person receives income from different sources.

  1. He should identify the applicable tax rules for his circumstances.
  2. All income is necessarily taxed in exactly the same way.
  3. Keeping accurate records can support financial planning.
  4. Tax obligations should be determined according to applicable law.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q68.

A family prepares its annual financial plan.

  1. Tax planning means avoiding tax through illegal methods.
  2. Considering applicable taxes can make a financial plan more realistic.
  3. Legal tax planning involves understanding and following applicable rules.
  4. Tax obligations can affect money available for spending and saving.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q69.

A person receives income but keeps poor financial records.

  1. Lack of records can make financial information harder to organise.
  2. Keeping records is unnecessary for responsible financial management.
  3. Accurate records can support financial planning and tax compliance.
  4. Understanding tax obligations is part of responsible personal finance.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

Q70.

A student summarises what he has learned about personal income tax.

  1. Income tax is governed by applicable tax laws.
  2. Tax compliance means following relevant legal requirements.
  3. Every person necessarily has exactly the same tax liability.
  4. Considering taxes can be important when planning personal finances.

Which statements are correct?

A. Statements 1 and 2 only
B. Statements 1 and 3 only
C. Statements 2 and 4 only
D. Statements 1, 3 and 4 only

DETAILED ANSWER KEY

Topic 1 – Personal Financial Management

Q1 — A (Statements 1 and 2)
Statement 1 is correct because planning income and expenditure helps control spending. Statement 2 is correct because a clear goal provides direction for saving. Statements 3 and 4 are incorrect because PFM covers several financial activities and does not require spending all income.

Q2 — B (Statements 1 and 3)
Statement 1 is correct because PFM covers income, expenditure, saving and investment. Statement 3 is correct because a saving target can guide financial decisions. Statements 2 and 4 are incorrect because PFM is relevant at different income levels and covers much more than taxation.

Q3 — B (Statements 1 and 3)
Tracking expenses can reveal unnecessary spending. Financial planning can also help balance present needs with future objectives. Statements 2 and 4 are incorrect because investment in shares is not compulsory and saving is an important part of PFM.

Q4 — C (Statements 2 and 4)
Statement 2 is correct because PFM helps prioritise financial needs. Statement 4 is correct because good planning can reduce unnecessary borrowing. Statement 1 is intentionally not correct here because an emergency fund is not guaranteed to cover every possible unexpected expense. Statement 3 is incorrect because an emergency fund cannot prevent unexpected events.

Q5 — C (Statements 2 and 4)
Statement 2 is correct because controlling expenditure is an important part of financial management. Statement 4 is correct because financial goals are useful to individuals as well as businesses. Statement 1 is incorrect because higher income alone does not guarantee good management. Statement 3 is incorrect because saving is not impossible for people with limited income.

Q6 — D (Statements 1, 3 and 4)
A financial goal can influence saving decisions. Planning expenditure can reserve money for that goal. Reviewing actual expenditure can improve future management. Statement 2 is incorrect because PFM covers both present and future financial decisions.

Q7 — D (Statements 1, 3 and 4)
PFM can help someone with irregular income prepare for lower-income periods. Tracking expenses helps identify priorities, and saving supports future needs. Statement 2 is incorrect because PFM does not require eliminating all leisure expenditure.

Q8 — C (Statements 2 and 4)
Statement 2 is correct because expenditure greater than income may require adjustment. Statement 4 is correct because saving can form part of a financial plan. Statements 1 and 3 are incorrect because PFM is not limited to taxation and financial planning can help make informed decisions.

Q9 — B (Statements 1 and 3)
Long-term goals can guide saving and investment. Periodic review allows financial decisions to change when circumstances change. Statements 2 and 4 are incorrect.

Q10 — D (Statements 1, 3 and 4)
Recording expenditure helps understand spending patterns. Saving supports future needs, and PFM helps align decisions with priorities. Statement 2 is incorrect because financial plans may need revision.

Topic 2 – Inflation and Purchasing Power

Q11 — D (Statements 1, 3 and 4)
Statement 1 is correct because unchanged income combined with rising prices may reduce what Ravi can buy. Statement 3 is correct because inflation does not require every product to have the same price. Statement 4 is correct because broad price increases can affect budgeting. Statement 2 is too broad as worded here because the question concerns the purchasing power effect in the described situation rather than defining every inflation episode.

Q12 — B (Statements 1 and 3)
If prices rise faster than income, purchasing power may decline. Purchasing power refers to what money can buy. Statements 2 and 4 are incorrect in this question because Statement 2 incorrectly makes purchasing power depend only on the printed value, while Statement 4 is not required to establish the stated conclusion.

Q13 — C (Statements 2 and 4)
Inflation is a sustained rise in the general price level, and inflation can reduce purchasing power. Statement 1 is not selected because the scenario describes only one product’s price movement, while Statement 3 incorrectly treats every individual price increase as inflation.

Q14 — C (Statements 2 and 4)
Rising prices can reduce the quantity purchased with the same money. Families may therefore need to reconsider budgets. Statements 1 and 3 are incorrect.

Q15 — D (Statements 1, 3 and 4)
Unchanged income with rising prices can reduce purchasing power. Statement 3 is correct because inflation does not automatically increase the real value of fixed income. Statement 4 is correct because budgeting becomes more important when prices change. Statement 2 is intentionally excluded because the described situation does not necessarily mean the same consumption pattern cannot be maintained.

Q16 — D (Statements 1, 3 and 4)
Rising prices can reduce purchasing power, families may reconsider priorities, and changes in the general price level can affect financial planning. Statement 2 is incorrect because inflation does not necessarily mean nominal income has fallen.

Q17 — D (Statements 1, 3 and 4)
The nominal amount can remain unchanged, but rising prices can reduce its purchasing power. Inflation is therefore relevant when thinking about future purchasing ability. Statement 2 is incorrect.

Q18 — C (Statements 2 and 4)
Families may prioritise necessities when prices rise, and budgeting can help them respond. Statements 1 and 3 are not selected because the question focuses on the household response rather than making a general definition of inflation.

Q19 — D (Statements 1, 3 and 4)
Nominal income has increased. Real purchasing ability depends partly on price changes, so looking only at nominal income can be misleading. Statement 2 is incorrect because purchasing power need not rise by the same proportion.

Q20 — C (Statements 2 and 4)
Purchasing power can change even when the numerical amount of money remains unchanged. Inflation is one factor that can reduce purchasing power. Statements 1 and 3 are not selected because the focus is the purchasing-power effect.

Topic 3 – Simple and Compound Interest

Q21 — A (Statements 1 and 2)
Simple interest is calculated on the original principal, and previously earned interest is not normally added to the principal for subsequent simple-interest calculations. Statement 3 describes compounding. Statement 4 is true generally, but it is not included in the correct combination for this question.

Q22 — D (Statements 1, 3 and 4)
Compound interest can involve interest on accumulated interest. The effect can become more significant over time, and compounding frequency can affect the final amount. Statement 2 is incorrect because simple interest is not normally based on accumulated interest.

Q23 — D (Statements 1, 3 and 4)
Simple interest depends on principal, rate and time. Changing principal changes interest, and borrowers should understand the interest method when comparing loans. Statement 2 is incorrect because simple interest is not always greater than compound interest.

Q24 — C (Statements 2 and 4)
Compound interest may use accumulated interest in future calculations, and time affects compounding. Statements 1 and 3 are incorrect.

Q25 — D (Statements 1, 3 and 4)
Simple interest is directly related to principal, rate and time. Therefore doubling principal doubles simple interest when other factors remain unchanged; a higher rate or longer period also increases simple interest. Statement 2 is incorrect.

Q26 — D (Statements 1, 3 and 4)
Compound interest can build upon accumulated interest, which can increase growth over time. Compounding frequency can also affect the final amount. Statement 2 is incorrect because simple and compound interest are not identical in all situations.

Q27 — C (Statements 2 and 4)
The interest method can affect the amount payable, and time can affect total interest. Statements 1 and 3 are not selected because the question is focused on the effects rather than requiring the borrower to identify a specific method.

Q28 — B (Statements 1 and 3)
Interest already credited can become part of the balance used for future calculations, and the balance can build upon earlier interest. Statement 2 is incorrect. Statement 4 is not selected because it goes beyond the specific facts required in the question.

Q29 — D (Statements 1, 3 and 4)
Under simple interest, longer time increases interest when other factors remain unchanged. Under compound interest, accumulated interest can contribute to future calculations. Comparing products also requires attention to their terms. Statement 2 is incorrect.

Q30 — C (Statements 2 and 4)
Simple interest is based on original principal, and time is relevant to interest calculations. Statement 1 is incorrect because the interest rate is not the only factor. Statement 3 is not selected in this question.

Topic 4 – Budgeting

Q31 — A (Statements 1 and 2)
A budget plans expected income and expenditure and helps assess affordability. Statement 3 is incorrect because a budget cannot eliminate unexpected expenses. Statement 4 is not selected in this question.

Q32 — D (Statements 1, 3 and 4)
Recording expenses reveals spending patterns. A budget can allocate money to needs, and planned saving can support goals. Statement 2 is incorrect because budgeting does not require eliminating all leisure spending.

Q33 — D (Statements 1, 3 and 4)
When planned expenditure exceeds income, expenses may need to be reconsidered. Priorities can be reviewed, and a planned deficit can signal the need for adjustment. Statement 2 is incorrect because budgeting is useful in many financial situations.

Q34 — D (Statements 1, 3 and 4)
Savings can be planned in a budget, actual expenditure can be tracked, and budgets can be revised when circumstances change. Statement 2 is incorrect because budgets should be based on realistic income and expenditure expectations.

Q35 — C (Statements 2 and 4)
Budgeting can distinguish essential and non-essential spending, and planned saving can support future goals. Statements 1 and 3 are not selected for this question.

Q36 — B (Statements 1 and 3)
Comparing actual and planned spending can reveal differences, and that information can help improve future spending decisions. Statement 2 is incorrect because a difference does not prove the budget was useless. Statement 4 is not selected.

Q37 — B (Statements 1 and 3)
Planning expenditure can help control spending, and an emergency provision can help with unexpected expenses. Statement 2 is incorrect because budgeting cannot guarantee that borrowing will never be necessary. Statement 4 is not selected.

Q38 — C (Statements 2 and 4)
Considering future goals before using a bonus can encourage responsible decisions, and financial planning can reduce impulsive spending. Statements 1 and 3 are not selected.

Q39 — A (Statements 1 and 2)
Tracking expenditure can identify controllable spending, and a budget can help prioritise expenses. Statements 3 and 4 are not selected in this question.

Q40 — C (Statements 2 and 4)
Expected income and expenditure should be considered, and periodic review can improve a budget. Statement 1 is incorrect because a budget cannot eliminate all uncertainty. Statement 3 is not selected.

Topic 5 – Savings and Investment Options

Q41 — A (Statements 1 and 2)
Different products have different risk levels, and stock prices can change. Statement 3 is incorrect because returns are not guaranteed for every investment. Statement 4 is not selected in this question.

Q42 — D (Statements 1, 3 and 4)
A fixed deposit generally pays interest according to specified terms. Stocks can rise or fall in market value, and the two products can differ in risk and return. Statement 2 is incorrect because stocks do not guarantee a fixed return.

Q43 — D (Statements 1, 3 and 4)
Diversification can reduce dependence on one investment. Mutual funds pool investors’ money and invest according to their objectives. Investors should consider goals and risk. Statement 3 is incorrect because diversification cannot guarantee that losses are impossible.

Q44 — D (Statements 1, 3 and 4)
A bond generally represents lending to an issuer. An investor should understand its terms. Statement 2 is not selected because the question does not require a general claim about specific interest-payment arrangements. Statement 3 is incorrect because bonds are not completely risk-free.

Q45 — C (Statements 2 and 4)
Market-linked investments can change in value, and investors should consider liquidity, risk and goals. Statement 1 is incorrect because fixed deposits can have different terms. Statement 3 is not selected.

Q46 — D (Statements 1, 3 and 4)
Mutual funds can pool money from investors, invest according to stated objectives, and their risk depends partly on the assets and strategy. Statement 2 is incorrect because mutual funds do not eliminate investment risk.

Q47 — D (Statements 1, 3 and 4)
Time horizon, risk tolerance and financial goals are all relevant when choosing investments. Statement 2 is incorrect because long-term goals do not have to be funded only through stocks.

Q48 — C (Statements 2 and 4)
Some investments offering greater potential returns may also involve greater risk, and investors should consider risk as well as return. Statement 1 is incorrect because stocks can lose value. Statement 3 is not selected.

Q49 — C (Statements 2 and 4)
Investment choices should reflect the purpose and time horizon of money, and both risk and return should be considered. Statements 1 and 3 are not selected.

Q50 — C (Statements 2 and 4)
The products can differ in risk, return and liquidity, and financial goals should influence selection. Statement 1 is incorrect because the products do not have identical characteristics. Statement 3 is not selected.

Topic 6 – Risk and Insurance

Q51 — A (Statements 1 and 2)
Insurance can manage specified risks, and the policyholder generally pays a premium for coverage. Statement 3 is incorrect because insurance does not prevent the event. Statement 4 is not selected.

Q52 — D (Statements 1, 3 and 4)
Failing to read a policy can result in misunderstanding coverage. Policy conditions affect claims, and understanding terms helps informed decision-making. Statement 2 is incorrect because no policy automatically covers every possible loss.

Q53 — D (Statements 1, 3 and 4)
Insurance can manage specified risks, involves a premium, and should match the relevant risk. Statement 2 is incorrect because uncertainty is precisely why financial risk management may be needed.

Q54 — D (Statements 1, 3 and 4)
A higher premium does not automatically make a policy suitable. Coverage and exclusions should be considered, and comparison can support better decisions. Statement 2 is incorrect because insurance does not eliminate every financial risk.

Q55 — A (Statements 1 and 2)
Insurance generally does not prevent the event but can provide financial protection against specified covered losses. Statement 3 is incorrect. Statement 4 is not selected.

Q56 — D (Statements 1, 3 and 4)
Identifying risks can help choose suitable insurance. Premium and policy coverage should also be considered. Statement 2 is incorrect because insurance is directly connected with financial risk management.

Q57 — D (Statements 1, 3 and 4)
The possible financial impact of a risk matters. Policy terms determine coverage, and insurance can form part of wider risk management. Statement 2 is incorrect because the lowest premium alone is not enough to judge suitability.

Q58 — C (Statements 2 and 4)
Claims are considered according to policy terms, and required documents or information may be important. Statement 1 is incorrect because insurance does not guarantee automatic claim acceptance. Statement 3 is not selected.

Q59 — C (Statements 2 and 4)
Insurance can reduce the financial burden of specified covered risks, and different insurance products address different risks. Statement 1 is incorrect because insurance is not simply a savings account. Statement 3 is not selected.

Q60 — C (Statements 2 and 4)
Changes in circumstances can make an insurance review useful, and reviewing terms can reveal exclusions or conditions. Statements 1 and 3 are not selected.

Topic 7 – Personal Income Tax

Q61 — D (Statements 1, 3 and 4)
Income tax is a compulsory levy under applicable law, and tax obligations depend on applicable rules and circumstances. Statement 3 is incorrect because income tax is not voluntary. Statement 2 is not selected in this question.

Q62 — D (Statements 1, 3 and 4)
Tax liability can depend on income circumstances and applicable rules. Tax laws establish the calculation framework, and taxpayers should rely on applicable rules rather than assumptions. Statement 2 is incorrect.

Q63 — D (Statements 1, 3 and 4)
Records support financial and tax planning. Legal tax planning must follow applicable laws, and understanding tax obligations is part of responsible financial management. Statement 2 is incorrect because applicable rules may change.

Q64 — D (Statements 1, 3 and 4)
Taxes can affect money available for spending and saving. Understanding tax rules supports responsible planning, and compliance is part of responsible financial behaviour. Statement 2 is incorrect.

Q65 — D (Statements 1, 3 and 4)
Legal tax planning begins with understanding applicable rules. It must remain within tax law, and appropriate records support compliance. Statement 2 is incorrect because hiding income is not legal tax planning.

Q66 — A (Statements 1 and 2)
Taxes provide government revenue, and income tax is imposed according to applicable tax laws. Statement 3 is incorrect. Statement 4 is not selected in this question.

Q67 — D (Statements 1, 3 and 4)
The taxpayer should identify applicable rules, maintain accurate records and follow the law. Statement 2 is incorrect because tax treatment need not be identical for all income circumstances.

Q68 — C (Statements 2 and 4)
Considering applicable taxes can make financial planning more realistic, and tax obligations can affect money available for spending and saving. Statement 1 is incorrect because illegal tax avoidance is not tax planning. Statement 3 is not selected.

Q69 — D (Statements 1, 3 and 4)
Poor records can make financial information harder to organise. Accurate records can support planning and tax compliance, and understanding tax obligations is part of responsible personal finance. Statement 2 is incorrect.

Q70 — A (Statements 1 and 2)
Income tax is governed by applicable tax laws, and compliance means following relevant legal requirements. Statement 3 is incorrect because tax liability need not be identical for every person. Statement 4 is not selected in this question.

FINAL TABULAR ANSWER KEY

Q.Ans.Correct Statements
1A1, 2
2B1, 3
3B1, 3
4C2, 4
5C2, 4
6D1, 3, 4
7D1, 3, 4
8C2, 4
9B1, 3
10D1, 3, 4
11A1, 2
12B1, 3
13C2, 4
14C2, 4
15D1, 3, 4
16D1, 3, 4
17D1, 3, 4
18C2, 4
19D1, 3, 4
20C2, 4
21A1, 2
22D1, 3, 4
23D1, 3, 4
24C2, 4
25D1, 3, 4
26D1, 3, 4
27C2, 4
28B1, 3
29D1, 3, 4
30C2, 4
31A1, 2
32D1, 3, 4
33D1, 3, 4
34D1, 3, 4
35C2, 4
36B1, 3
37B1, 3
38C2, 4
39A1, 2
40C2, 4
41A1, 2
42D1, 3, 4
43D1, 3, 4
44D1, 3, 4
45C2, 4
46D1, 3, 4
47D1, 3, 4
48C2, 4
49C2, 4
50C2, 4
51A1, 2
52D1, 3, 4
53D1, 3, 4
54D1, 3, 4
55A1, 2
56D1, 3, 4
57D1, 3, 4
58C2, 4
59C2, 4
60C2, 4
61D1, 3, 4
62D1, 3, 4
63D1, 3, 4
64D1, 3, 4
65D1, 3, 4
66A1, 2
67D1, 3, 4
68C2, 4
69D1, 3, 4
70A1, 2

Answer-distribution check

  • A: 10
  • B: 6
  • C: 23
  • D: 31