International Baccalaureate (IB) Practice Exam

Which type of expense do regular monthly bills typically represent?

1. Fixed expense

2. Variable expense

3. Discretionary expense

4. Occasional expense

The correct answer is: Fixed expense

Regular monthly bills typically represent fixed expenses because they are predictable in nature and occur consistently each month. Examples of fixed expenses include rent or mortgage payments, insurance premiums, and subscription services. These expenses are generally known in advance and do not fluctuate from month to month, allowing individuals to budget accordingly. In contrast, variable expenses can change based on usage or consumption, such as utility bills or grocery costs, which may vary significantly from month to month. Discretionary expenses refer to non-essential spending, such as dining out or entertainment, which can be adjusted or eliminated based on one's financial situation. Occasional expenses are infrequent and may arise unexpectedly, like car repairs or medical bills. Thus, the fixed nature of regular monthly bills classifies them distinctly as fixed expenses.