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13 Terms
Externalities
third-party unintended consequences
Nondurable good
product with a lifespan of less than three years
Contract
a formal and legally binding agreement between two or more parties
Overdraft fee
the fee a bank charges if someone spends more money than is in their bank account
Interest rate
rate paid or charged for use of money
Inflation
the general rise of prices
Nominal interest rate
the rate quoted in loan and deposit agreements
Real interest rate
the rate an investment is expected to earn, after inflation
Compound interest
calculating interest earned based on original deposited amount plus interest already earned
APY
interest you earn over the course of a year
How do you find the real interest rate?
Inflation - nominal interest rate
How do the government and employers encourage people to save?
Tax advantages through adding to your 401k
Relationship between interest rates and inflation?
When inflation rises, interest does too.