Multiple Choice
Which of the following is NOT true about creating an inventory of your possessions?
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1. Introduction to Accounting
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Which of the following problems can most effectively be addressed by having a money plan (budget)?
A
Fluctuations in market interest rates
B
Overspending and lack of savings
C
Inflation in the overall economy
D
Changes in tax legislation
Verified step by step guidance1
Understand the purpose of a money plan (budget): A budget is a financial tool that helps individuals or organizations plan their income and expenses to achieve financial goals, avoid overspending, and ensure savings.
Analyze the options provided in the question: Fluctuations in market interest rates, overspending and lack of savings, inflation in the overall economy, and changes in tax legislation.
Evaluate which of these issues can be directly controlled or mitigated by a budget: A budget cannot control external factors like market interest rates, inflation, or tax legislation, but it can help manage personal financial behavior such as overspending and saving.
Conclude that the most effective problem addressed by a budget is overspending and lack of savings, as it directly relates to managing personal or organizational finances.
Remember that while a budget is a powerful tool for financial management, it cannot influence macroeconomic factors or government policies.
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