HISET Social Studies Practice

Which of the following describes a fixed expense?

1. An unpredictable cost

2. A cost that varies significantly each month

3. An expense that remains consistent each month

4. An expense that is entirely discretionary

The correct answer is: An expense that remains consistent each month

A fixed expense is defined as an expense that remains consistent each month, regardless of how much a person uses a service or product. This means that the amount does not change and is predictable, making it easier for individuals to budget effectively. Common examples of fixed expenses include rent or mortgage payments, insurance premiums, and loan payments, which typically remain the same over an extended period. In contrast, the other options describe characteristics of expenses that do not align with the definition of fixed expenses. An unpredictable cost refers to expenses that can fluctuate and are not easily anticipated, while a cost that varies significantly each month cannot be classified as fixed. Lastly, an expense that is entirely discretionary refers to costs that are optional and can be controlled or eliminated based on personal choice, which again differs from the necessity and predictability of fixed expenses.