CHAPTER 5: MANAGING YOUR PERSONAL FINANCES
50 MULTIPLE CHOICE QUESTIONS (MCQs)
1. What does personal finance refer to?
(A) Managing only business accounts
(B) Planning and managing an individual’s money to meet needs and wants
(C) Collecting taxes for the government
(D) Managing the finances of a country
Answer: (B) Planning and managing an individual’s money to meet needs and wants
2. Which of the following is a pillar of personal finance?
(A) Budgeting
(B) Election
(C) Governance
(D) Legislation
Answer: (A) Budgeting
3. How many pillars of personal finance are identified in the chapter?
(A) Three
(B) Four
(C) Five
(D) Six
Answer: (C) Five
4. Which of the following is an example of income?
(A) Buying a school bag
(B) Paying rent for a house
(C) Purchasing groceries
(D) Receiving a salary as a teacher
Answer: (D) Receiving a salary as a teacher
5. What is budgeting?
(A) Planning in advance how income will be spent
(B) Spending all income immediately
(C) Borrowing money without a plan
(D) Investing only in shares
Answer: (A) Planning in advance how income will be spent
6. What is the main purpose of preparing a budget?
(A) To increase unnecessary spending
(B) To balance income and expenses
(C) To avoid saving money
(D) To eliminate all financial goals
Answer: (B) To balance income and expenses
7. Which of the following is the first step in budgeting?
(A) Reviewing the budget
(B) Tracking spending
(C) Identifying expenses
(D) Investing in shares
Answer: (C) Identifying expenses
8. What should a person do after setting a savings goal while preparing a budget?
(A) Stop recording expenses
(B) Spend all remaining money immediately
(C) Ignore changes in income
(D) Track spending regularly
Answer: (D) Track spending regularly
9. Why should a budget be reviewed periodically?
(A) To reflect changes in income, expenses, and financial goals
(B) To increase unnecessary expenditure
(C) To avoid saving money
(D) To eliminate financial planning
Answer: (A) To reflect changes in income, expenses, and financial goals
10. Saving means:
(A) Spending all available money
(B) Keeping aside a part of income for future use
(C) Borrowing money from others
(D) Purchasing goods on credit
Answer: (B) Keeping aside a part of income for future use
11. Why is saving important?
(A) It guarantees that no emergency will occur
(B) It eliminates the need for budgeting
(C) It helps meet future needs and unexpected expenses
(D) It prevents people from investing
Answer: (C) It helps meet future needs and unexpected expenses
12. What is investing?
(A) Keeping all money unused at home
(B) Spending money on immediate wants
(C) Borrowing money for unnecessary purchases
(D) Putting savings into assets to protect their value and generate returns
Answer: (D) Putting savings into assets to protect their value and generate returns
13. What is compounding?
(A) Earning returns on the original investment as well as on previously earned returns
(B) Spending money without keeping records
(C) Paying only the original amount of a loan
(D) Dividing income among household expenses
Answer: (A) Earning returns on the original investment as well as on previously earned returns
14. Why can starting investments early be beneficial?
(A) It eliminates every investment risk
(B) Investments have more time to generate returns through compounding
(C) It guarantees a fixed return from every asset
(D) It removes the need to save regularly
Answer: (B) Investments have more time to generate returns through compounding
15. What is inflation?
(A) A decrease in all prices over time
(B) An increase in personal savings
(C) An increase in the prices of goods and services over time
(D) A reduction in the amount of money earned
Answer: (C) An increase in the prices of goods and services over time
16. What happens to purchasing power when prices rise and money does not grow in value?
(A) Purchasing power always doubles
(B) Purchasing power remains unchanged in every case
(C) Purchasing power increases automatically
(D) Purchasing power decreases
Answer: (D) Purchasing power decreases
17. What does liquidity refer to?
(A) How easily an asset can be converted into cash without significantly affecting its value
(B) The amount of tax paid by an individual
(C) The profit earned by a business only
(D) The time taken to repay every loan
Answer: (A) How easily an asset can be converted into cash without significantly affecting its value
18. Which of the following is a common investment option?
(A) Monthly grocery shopping
(B) Fixed deposits
(C) School attendance
(D) Household cleaning
Answer: (B) Fixed deposits
19. What is a fixed deposit?
(A) A loan taken for purchasing a vehicle
(B) An investment whose returns always depend on daily share prices
(C) A lump sum deposited for a fixed period at an agreed rate of interest
(D) A payment made for insurance coverage
Answer: (C) A lump sum deposited for a fixed period at an agreed rate of interest
20. Which of the following is generally considered a safer investment option?
(A) Shares of an unknown company
(B) Every type of corporate bond
(C) Speculative investments
(D) Fixed deposits
Answer: (D) Fixed deposits
21. What is the Public Provident Fund (PPF)?
(A) A government-backed long-term savings option
(B) A type of motor insurance
(C) A short-term consumer loan
(D) A stock market index
Answer: (A) A government-backed long-term savings option
22. What happens when a person buys a bond?
(A) The person automatically becomes the owner of a company
(B) The person lends money to the government or a company
(C) The person receives free insurance
(D) The person becomes exempt from income tax
Answer: (B) The person lends money to the government or a company
23. How do bondholders generally earn returns?
(A) Through salary payments from the government
(B) Through compulsory tax refunds
(C) Through interest payments
(D) Through insurance premiums
Answer: (C) Through interest payments
24. What do shares represent?
(A) A fixed monthly expense
(B) A type of insurance premium
(C) A government tax payment
(D) Ownership in a company
Answer: (D) Ownership in a company
25. Which of the following is a possible source of return from shares?
(A) Dividends and an increase in share price
(B) Guaranteed repayment at a fixed interest rate in every case
(C) Insurance compensation in all circumstances
(D) A fixed salary from the company
Answer: (A) Dividends and an increase in share price
26. What is the BSE SENSEX?
(A) A government insurance scheme
(B) A benchmark index of the Bombay Stock Exchange
(C) A type of bank deposit
(D) A system for calculating household budgets
Answer: (B) A benchmark index of the Bombay Stock Exchange
27. How many companies does the BSE SENSEX track, according to the chapter?
(A) 10
(B) 20
(C) 30
(D) 50
Answer: (C) 30
28. What is a mutual fund?
(A) A personal loan from a bank
(B) A type of income tax
(C) An insurance contract for vehicles
(D) An investment that pools money from many investors to invest in financial assets
Answer: (D) An investment that pools money from many investors to invest in financial assets
29. Who manages the investments of a mutual fund?
(A) Professional fund managers
(B) School principals
(C) Insurance policyholders alone
(D) Local shopkeepers
Answer: (A) Professional fund managers
30. What is portfolio diversification?
(A) Investing all money in a single asset
(B) Spreading investments across different types of assets
(C) Keeping all money as cash at home
(D) Spending all savings on consumer goods
Answer: (B) Spreading investments across different types of assets
31. What is insurance?
(A) A method of increasing household expenses
(B) A compulsory investment in company shares
(C) A legal contract that provides financial compensation for specified covered losses
(D) A system for calculating monthly income
Answer: (C) A legal contract that provides financial compensation for specified covered losses
32. What is the regular amount paid by an insured person to an insurance company called?
(A) Dividend
(B) Principal
(C) Return
(D) Premium
Answer: (D) Premium
33. On which principle does insurance work?
(A) Risk sharing
(B) Guaranteed profit from investments
(C) Unlimited borrowing
(D) Compulsory saving for every individual
Answer: (A) Risk sharing
34. Which type of insurance helps cover hospitalisation, medicines, and diagnostic tests?
(A) Motor insurance
(B) Health insurance
(C) Crop insurance
(D) Property insurance
Answer: (B) Health insurance
35. What is the main purpose of life insurance?
(A) To protect a vehicle against accident damage
(B) To cover crop losses caused by pests
(C) To provide financial support to a family if the policyholder passes away
(D) To guarantee profits from shares
Answer: (C) To provide financial support to a family if the policyholder passes away
36. Which type of insurance can protect a home against losses caused by fire, theft, or floods?
(A) Health insurance
(B) Life insurance
(C) Education insurance only
(D) Property insurance
Answer: (D) Property insurance
37. What is the purpose of crop insurance?
(A) To protect farmers against specified financial losses affecting their crops
(B) To guarantee that market prices will always rise
(C) To eliminate the need for farming expenses
(D) To provide a fixed salary to every farmer
Answer: (A) To protect farmers against specified financial losses affecting their crops
38. When can borrowing or using credit be helpful?
(A) When a person borrows without considering repayment
(B) When it is used for necessary or productive purposes and can be repaid responsibly
(C) When loans are taken for every unnecessary purchase
(D) When a person ignores all interest payments
Answer: (B) When it is used for necessary or productive purposes and can be repaid responsibly
39. What does EMI stand for?
(A) Estimated Money Income
(B) Equal Market Investment
(C) Equated Monthly Instalment
(D) Electronic Money Insurance
Answer: (C) Equated Monthly Instalment
40. What does an EMI generally include?
(A) Only the original loan amount
(B) Only the borrower’s monthly income
(C) Only the interest charged by the lender
(D) A portion of the principal and the interest charged by the lender
Answer: (D) A portion of the principal and the interest charged by the lender
41. Which of the following is NOT one of the four factors to consider before making an investment decision?
(A) Popularity among friends
(B) Risk
(C) Return
(D) Liquidity
Answer: (A) Popularity among friends
42. What does investment risk refer to?
(A) The guaranteed profit from an investment
(B) The possibility of losing money
(C) The amount of income tax paid
(D) The time needed to prepare a budget
Answer: (B) The possibility of losing money
43. What does return mean in investing?
(A) The total amount spent on household expenses
(B) The money borrowed from a bank
(C) The profit earned from an investment
(D) The insurance premium paid every month
Answer: (C) The profit earned from an investment
44. What is the general relationship between risk and return?
(A) Higher risk always means a guaranteed loss
(B) Risk and return are completely unrelated
(C) Lower-risk investments always provide the highest returns
(D) Higher-risk investments may offer higher potential returns
Answer: (D) Higher-risk investments may offer higher potential returns
45. What are taxes?
(A) Compulsory payments made by individuals and businesses to the government
(B) Voluntary gifts given to private companies
(C) Interest earned from bank deposits
(D) Money saved for personal emergencies
Answer: (A) Compulsory payments made by individuals and businesses to the government
46. Which of the following is an example of a direct tax?
(A) Goods and Services Tax
(B) Income tax
(C) A fee paid for a private service
(D) A household electricity bill
Answer: (B) Income tax
47. Which of the following is an example of an indirect tax?
(A) Personal income tax
(B) Tax on an individual’s salary
(C) Goods and Services Tax (GST)
(D) Tax on a company’s profits
Answer: (C) Goods and Services Tax (GST)
48. What is progressive taxation?
(A) A system in which everyone pays exactly the same amount of tax
(B) A system in which taxes are never collected
(C) A system in which lower-income individuals always pay the highest tax rates
(D) A system in which higher incomes are subject to higher tax rates
Answer: (D) A system in which higher incomes are subject to higher tax rates
49. Which organisation administers laws relating to direct taxes in India, according to the chapter?
(A) Central Board of Direct Taxes (CBDT)
(B) Bombay Stock Exchange (BSE)
(C) Reserve Bank of India alone
(D) National Savings Certificate Office
Answer: (A) Central Board of Direct Taxes (CBDT)
50. Why is paying taxes honestly and on time important?
(A) It guarantees that every citizen will earn the same income
(B) It helps fund public services and national development
(C) It eliminates the need for government budgets
(D) It guarantees high returns from investments
Answer: (B) It helps fund public services and national development
CLASS 9 SOCIAL SCIENCE
CHAPTER 5: MANAGING YOUR PERSONAL FINANCES
20 ASSERTION–REASON QUESTIONS
Choose the correct option:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.
1. Assertion (A): Personal finance involves planning and managing an individual’s money.
Reason (R): Personal finance includes decisions about spending, saving, investing, and preparing for future financial needs.
Answer: (A)
2. Assertion (A): Budgeting helps individuals control unnecessary spending.
Reason (R): A budget is a written plan that aims to balance income and expenses.
Answer: (A)
3. Assertion (A): A budget should never be changed after it has been prepared.
Reason (R): A budget should be reviewed periodically to reflect changes in income, expenses, and financial goals.
Answer: (D)
4. Assertion (A): Saving means keeping aside a part of one’s income for future use.
Reason (R): Savings can help people meet future needs and unexpected expenses.
Answer: (A)
5. Assertion (A): Keeping money as cash at home always protects its purchasing power against inflation.
Reason (R): Inflation increases the prices of goods and services and can reduce the purchasing power of money.
Answer: (D)
6. Assertion (A): Compounding can help investments grow over time.
Reason (R): Compounding allows returns already earned to generate additional returns.
Answer: (A)
7. Assertion (A): Starting to invest earlier can provide an advantage over starting later.
Reason (R): Earlier investments have more time to benefit from compounding.
Answer: (A)
8. Assertion (A): Fixed deposits generally offer assured returns at an agreed rate of interest.
Reason (R): Fixed deposits require investors to purchase ownership shares in a company.
Answer: (C)
9. Assertion (A): Buying shares makes a person a part-owner of a company.
Reason (R): Shareholders may earn returns through dividends and an increase in share prices.
Answer: (B)
10. Assertion (A): Mutual funds pool money from many investors.
Reason (R): Mutual funds invest only in fixed deposits and never invest in shares or bonds.
Answer: (C)
11. Assertion (A): Diversification can help reduce investment risk.
Reason (R): Diversification spreads investments across different types of financial assets.
Answer: (A)
12. Assertion (A): Insurance helps protect individuals and families against specified financial losses.
Reason (R): Insurance works on the principle of risk sharing, with premiums contributed to a common pool.
Answer: (A)
13. Assertion (A): Health insurance can help cover medical expenses.
Reason (R): Life insurance provides financial support to a family if the policyholder passes away.
Answer: (B)
14. Assertion (A): Borrowing money for unnecessary consumer goods can create financial difficulties.
Reason (R): Responsible borrowing involves taking loans only when necessary and ensuring timely repayment.
Answer: (B)
15. Assertion (A): EMI stands for Equated Monthly Instalment.
Reason (R): An EMI generally includes a portion of the principal amount and the interest charged by the lender.
Answer: (A)
16. Assertion (A): Every investment with a high potential return is completely risk-free.
Reason (R): Higher-risk investments may offer higher potential returns, but they also involve a greater possibility of loss.
Answer: (D)
17. Assertion (A): Taxes help the government fund public services such as schools, hospitals, transport, and defence.
Reason (R): Taxes are compulsory payments made by individuals and businesses to the government.
Answer: (A)
18. Assertion (A): GST is an example of a direct tax.
Reason (R): Income tax is a direct tax paid on a person’s or organisation’s income or profits.
Answer: (D)
19. Assertion (A): Progressive taxation aims to reduce income inequality.
Reason (R): Under progressive taxation, higher incomes are subject to higher tax rates.
Answer: (A)
20. Assertion (A): Paying taxes honestly and on time is an important responsibility of citizens.
Reason (R): Tax revenue helps fund public services and contributes to the development of the country.
Answer: (A)
