Another financial literacy test

[harley]

It's not about fast food! It's about economics and the free market! Jeez. Substitute almost anything else for fast food restaurants, removing the prejudices of those who can't appreciate the qualities of this particular cuisine, and the question's a no brainer.

Seriously, when I was in college we only had one fast food restaurant in town. It was a Ray's, with Richard Petty as the celebrity spokesman. It sucked big time. Over the next 3 years we got such high end establishments as Wiener King, McDonalds, KFC, and Taco Hell. And they each brought in jobs, which were in short supply in the area. The prices were pretty standard, but the service and quality of the food (relative to the limitations of the menu) was better in the ones that became successful.

I went back a few years later and Rays was gone. So was Wiener King, which was a shame IMHO. But others had come in, and things were better. So despite many people's difficulty with the concept of fast food existing side by side with quality and economic success, I've seen it happen with my own eyes.

 

[Viking]

Well, 20/20 here. Pretty basic Econ 101 type questions.

 

[ERD50]

It's not about fast food! It's about economics and the free market! Jeez. Substitute almost anything else for fast food restaurants, removing the prejudices of those who can't appreciate the qualities of this particular cuisine, and the question's a no brainer.
...

+1000

It's about what competition does for a marketplace. Maybe it would have been better if they simply said "value" rather than prices & 'quality'.

But then I suppose, someone would say "But I don't like how they market those Value-Meals to kids, with the toys and everything!".

-ERD50

 

[sengsational]

95% here. I got #12 wrong. I was teetering between whether or not consumers determine who produces goods and services. In the end, isn't it the choice of the producer?

Me too. 95. I figured consumers act through producers, not directly.

 

[bjorn2bwild]

In my area, it is B -

1.
A large increase in the number of fast-food restaurants in a community is most likely to result in:
A. Lower prices and higher quality.
B. Lower prices and lower quality people.
C. Higher prices and higher quality.
D. Don't Know

 

[jollystomper]

95% (19/20). Missed #16, but in looking at it again I misread the correct answer.

 

[athena53]

100%. Some demographics definitely "stuck". Number of male and employed respondents has gone up since earlier posts; number of females and Unemployed is unchanged.


I agree that it's biased towards classical economics and real life isn't that simple.

 

[prototype]

I "aced" it but still know that Q#1 is wrong. When all the fast food places are desperately trying to hire (high growth) from a limited pool of workers, the quality of worker diminishes and so does the food........

That question (#1), is the one I got wrong so I got a 95%. I just based my answer on what I've experienced (i.e. real life) where I've been living for quite a while. More fast food restaurants than ever, and the general quality just seems to be fading.

Maybe it is just that my expectations on fast food has increased

 

[Henry Lili]

20 out of 20. One or two could have gone either way so a bit of luck.

 

[UpAnchor]

19 of 20 but then failed to look at which one I flubbed. So I guess I don't know what I don't know...


Sent from my iPhone using Early Retirement Forum

 

[dadu007]

IMO, this is a poorly worded question:

"An increase from 5% to 8% in the interest rates charged by banks would most likely encourage:"

Is that an interest rate for savings or for a mortgage?
- If mortgage, then people would buy a house sooner rather than later
- If savings, people would save more.

I assumed mortgage, and so I got it wrong. In my parlance you "charge" interest for a mortgage, and not a savings account (you are "paid" or "receive" on a savings account).

 

[fanmail]

Yeah that was poorly worded. Several of the questions were.

 

[ERD50]

IMO, this is a poorly worded question:

"An increase from 5% to 8% in the interest rates charged by banks would most likely encourage:"

Is that an interest rate for savings or for a mortgage?
- If mortgage, then people would buy a house sooner rather than later
- If savings, people would save more.

I assumed mortgage, and so I got it wrong. In my parlance you "charge" interest for a mortgage, and not a savings account (you are "paid" or "receive" on a savings account).

I think it's fine as is. For reference:

3.
An increase from 5% to 8% in the interest rates charged by banks would most likely encourage:

A. Businesses to invest.
B. People to purchase housing.
C. People to save money.
D. Don't Know.

The interest rates a bank charges are related to what they offer as well. Mortgages are near historic lows, and so are savings account and CD rates. When mortgages were in double digit rates in the 80s, so were CDs.

Higher interest rates makes money more expensive for a business, and therefore will discourage them from investing.

Higher interest rates makes mortgages more expensive, and therefore will discourage housing purchases.

Getting better interest rates can encourage people to save, it's the most correct of the three, and generally correct.

When you said, '- If mortgage, then people would buy a house sooner rather than later' - you are reading far, far too much into the question. You are assuming that rates are 5% now, and there was some big announcement that rates will be going up to 8% at some specific date in the future, and you have time to still get 5%. That might encourage people to buy now, but mortgage rates don't work that way. Rates change, they are not announced six months ahead of time.

I have a bigger issue with the general wording ' An increase from 5% to 8% '. You have to judge from context whether those are absolute percentage points, or a percentage change. It could mean that a current rate of 10% is increasing to a range of 10.5% to 10.8%. Too ambiguous for me.


-ERD50

 

[MBAustin]

Same result here. And not having a "retired" option for employment is discriminatory. See, I'm already invisible!

Re question 1, I got it right, but only by remembering what is supposed to happen according to economic theory, not what actually does. Which is that the food is still crap.

+1

Got 20/20. Interesting how several semesters of economics in college and grad school more than 30 years ago came back crystal clear to answer these questions - I could even picture the graphs! I always thought I forgot everything the day after the final exam!

 

[Car-Guy]

+1

I always thought I forgot everything the day after the final exam!

There was a final exam?

 

[Walt34]

There was a final exam?

Yes. The results determine whether you can RE or have to work until you're dead.

 

[Koolau]

95% - Missed 9 (Guess I gave too little credit to "producers".) YMMV

 

[NW-Bound]

I took the test. That's it for financial literacy?

Darn! I should be filthy rich, since I know so much.

Oh wait! I forgot that the market can be so irrational at times. I guess I still do not know enough to be a good trader like Soros.

 

[Golden sunsets]

100. Straight out of my old macro and micro textbooks

 

[Spanky]

I took the test. That's it for financial literacy?

These questions are more related to economics than finance/investing.

 

[youbet]

These questions are more related to economics than finance/investing.

Yep, that's what the author's clearly stated. OP was just a tad off mark when he said "financial literacy."

Test your own economic literacy with these 20 questions

 

[Thormole]

20 of 20. That was a nice surprise!