Advanced Diploma of Financial Planning (ADFP) Practice Test

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Prepare for the Advanced Diploma of Financial Planning Exam with comprehensive quizzes on finance principles, investment strategies, and risk management. Improve your knowledge and excel in your financial planning career!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

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What does FICA stand for?

Federal Insurance Contribution Act
Federal Insurance Collection Agency
Fiscal Insurance Contribution Account
Financial Insurance Contribution Assessment

The correct answer is: Federal Insurance Contribution Act

FICA stands for the Federal Insurance Contribution Act. This act establishes the framework for funding Social Security and Medicare programs through payroll taxes imposed on employees and employers. The revenue generated from these taxes is used to provide benefits to eligible individuals, ensuring support for retirees and those with disabilities. It is essential for the functioning of the federal social insurance system and is a key part of the U.S. financial safety net. The other choices do not accurately represent the full name or purpose of FICA. For instance, the term "Federal Insurance Collection Agency" might imply a role in collecting taxes, but it does not correspond to any existing federal legislation and does not capture the essence of the contribution to Social Security and Medicare programs. Similarly, "Fiscal Insurance Contribution Account" and "Financial Insurance Contribution Assessment" do not reflect the precise terminology or the legal context around the payroll taxes collected under FICA. Thus, understanding FICA in its correct context is critical for grasping how the U.S. funds these essential government programs.