International Baccalaureate (IB) Practice Exam

The widespread financial insecurity of Americans is primarily because?

1. The incomes of Americans are low

2. The saving rate of Americans is low and many borrow in order to spend more than they earn

3. Government programs are unavailable to help people when they are disabled or experience unemployment

4. Most Americans save a high proportion of their income

The correct answer is: The saving rate of Americans is low and many borrow in order to spend more than they earn

The correct choice highlights how the low saving rate among Americans, combined with borrowing behaviors, contributes significantly to widespread financial insecurity. Many individuals in the United States spend beyond their means, relying on credit to finance their lifestyles. This habit of borrowing can lead to debts that become unmanageable, especially during times of financial stress or unexpected expenses. When people do not save enough or borrow excessively, they lack the financial cushion needed to handle emergencies, making them more vulnerable to financial instability. In this context, although low incomes and the lack of government support can contribute to financial challenges, they are not the primary drivers of widespread insecurity when compared to the behaviors of borrowing and saving. Conversely, the notion that most Americans save a high proportion of their income contradicts the reality of low savings rates contributing to financial insecurity. Therefore, focusing on spending habits and the reliance on credit provides a clearer understanding of why financial insecurity is widespread.