International Baccalaureate (IB) Practice Exam

What category do expenses such as dining out fall under?

1. Fixed expense

2. Variable expense

3. Discretionary expense

4. Intermittent expense

The correct answer is: Discretionary expense

Dining out falls under the category of discretionary expenses. Discretionary expenses are those that are not essential and can be adjusted based on personal preferences and financial circumstances. Unlike fixed expenses, which remain constant over time regardless of usage (such as rent or mortgage), discretionary expenses are more flexible and can vary significantly from month to month. Dining out is typically considered a luxury or a choice that individuals can decide to forego or budget for depending on their financial situation, thus categorizing it as discretionary. This is in contrast to variable expenses, which can change in amount but are necessary for day-to-day living, such as groceries or utility bills. Intermittent expenses, which occur at irregular intervals (like car repairs), do not fit dining out because it can happen regularly or sporadically based on choice rather than necessity.