TOP DRAWER ARTICLE

Test Your Financial Knowledge
by
HL Carpenter

The more you know about investing, the better the decisions you can make. Here’s a short quiz to test your knowledge of financial basics.

1. What is deflation?

a. A sustained fall in the general price level
b. An increase in the overall price level
c. An upturn in the economy

2. Is deflation good or bad?

a. Good
b. Bad
c. Can be both good and bad

3. What is the primary cause of inflation?

a. Increased money supply and decreased supply of goods
b. Decreased money supply and increased supply of goods
c. Increased demand for money and decreased demand for goods.

4. What is disinflation?

a. A period when the inflation rate is positive, but declining over time
b. A jobless recovery
c. A sudden increase in the prices of goods and services

5. Why should you have a diversified portfolio?

a. Because you like to own a lot of different stocks
b. Because different groups of stocks pay better dividends
c. Because when the market goes up or down, a diversified portfolio usually outperforms a one-stock portfolio

6. Which investments have the lowest risk?

a. Common stocks and real estate
b. Savings accounts and money market funds
c. Mutual funds and investment grade bonds

7. How can the average investor loan money and receive interest?

a. Purchase government bonds or treasury notes
b. Buy home mortgages or property tax liens
c. Both A and B

Click here for the answers.

Originally published June 2004.

Last update: January 8, 2011