A savings plan operated by a state or educational institution designed to help families set aside funds for future college costs
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absolute advantage
the ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources
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Assets
resources owned by a business
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barter
Exchange goods without involving money.
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Board of Governors of the Federal Reserve System
The seven-member board that supervises the banking system of the United States
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Bonds
A certificate issued by a government or private company which promises to pay back with interest the money (principal) borrowed from the buyer of the certificate. Example- The city issued bonds to raise money for putting in new sewers.
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budget
A plan for making and spending money
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business cycle
Alternating periods of economic expansion and economic recession
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business investment
investment spending by businesses that creates additional output and jobs, including new housing and increases in inventory
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cap and trade
a method for managing pollution in which a limit is placed on emissions and businesses or countries can buy and sell emissions allowances
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Certificate of Deposit (CD)
An interest-earning deposit that requires the funds to remain deposited for a fixed term. Withdrawal of the funds before the term expires results in a financial penalty.
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checking account
an account at a bank against which checks can be drawn by the account depositor.
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Closing
in real estate, a meeting of the seller, the buyer, and the lender of funds, or representatives of each party, to complete the transaction
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collision insurance
This covers the car of the insured person and pays for repairs after an accident or cash compensation if the car can't be repaired. This type of coverage is usually optional
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comparative advantage
the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors
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compound interest
interest earned on both the principal amount and any interest already earned
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comprehensive insurance
covers your car for reasons other than a collision, such as theft, fire, vandalism
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Consumer Price Index (CPI)
a measure of the overall cost of the goods and services bought by a typical consumer
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consumption
spending by households on goods and services, with the exception of purchases of new housing
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contractionary fiscal policy
Fiscal policy used to decrease aggregate demand or supply. Deliberate measures to decrease government expenditures, increase taxes, or both. Appropriate during periods of inflation.
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Credit Report
a report on a person's creditworthiness that includes identifying information, credit cards, late payments, bankruptcies, and savings balances
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Credit Score
a number assigned to a person that indicates to lenders their capacity to repay a loan. 300-900 (a higher score is better)
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cyclical unemployment
unemployment that rises during economic downturns and falls when the economy improves
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Deductible
Amount you must pay before you begin receiving any benefits from your insurance company
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Deflation
A situation in which prices are declining
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diminishing marginal returns
a level of production in which the marginal product of labor decreases as the number of workers increases
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Diversification
Spreading out investments to reduce risk
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double coincidence of wants
the unlikely occurrence that two people each have a good the other wants
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excess reserves
reserves that banks hold over and above the legal requirement
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expansion
A period of economic growth as measured by a rise in real GDP
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expansionary fiscal policy
An increase in government purchases of goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing aggregate demand and expanding real output
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Federal Reserve
the central bank of the United States
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financial risk
uncertainty about future outcomes that involve financial losses and gains
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fiscal policy
the use of government spending and revenue collection to influence the economy
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FOMC (Federal Open Market Committee)
12 Member group that buys and sells US gov. securities to influence the money supply.
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Foreclosure
The seizure of property from borrowers who are unable to repay their loans
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frictional unemployment
A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.
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full employment
the level of employment reached when there is no cyclical unemployment; around 4%
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GDP formula
Y\=C+I+G+NX
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Government Spending
spending by all levels of government on final goods and services
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Gross Domestic Product (GDP)
A measurement of the total goods and services produced within a country.
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Growth Funds
mutual funds that focus on stocks that have potential for above-average growth
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hyper inflation
Extremely rapid inflation. This was seen in post- Treaty of Versailles Europe, such as Germany. Countries printed money to pay off bills. This resulted in a massive wave of inflation. Over 50% per month.
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Index Fund
A mutual fund that tries to match the performance of a particular index, like the S & P 500, by investing in the companies included in that index.
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inflation rate
the percentage increase in the price level from one year to the next
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inflation risk
The danger that money won't be worth as much in the future as it is today
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Inflation
a general increase in prices and fall in the purchasing value of money.
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inside lag
a delay between the onset of a problem and the implementation of a solution
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insurance
protection against possible financial loss
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Liabilities
what a company owes
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liability insurance
insurance that provides protection from claims arising from injuries or damage to other people or property
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marginal benefit
the extra benefit of adding one unit
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marginal cost
the cost of producing one more unit of a good
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Marginal Principle
you should continue an activity as long as the marginal benefit is greater than the marginal cost
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market economy
economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets
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market failure
a situation in which the free market, operating on its own, does not distribute resources efficiently
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monetary policy
managing the economy by altering the supply of money and interest rates
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money multiplier
the amount of money the banking system generates with each dollar of reserves
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mortgage
a specific type of loan that is used to buy real estate
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Mutual funds
An investment that holds a wide range of different investment instruments, providing diversification, including stocks and bonds
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nominal value
the face value of an amount of money
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open market operations
a tool used by the Federal Reserve to adjust the money supply by buying or selling U.S. government bonds in the financial market
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open market purchase
The purchase of U.S. government bonds by the FED to increase the money supply
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open market sale
the sale of US government bonds by the FED to reduce the money supply
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opportunity cost
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another
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outside lag
the time between a policy action and its influence on the economy
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Outsourcing
A decision by a corporation to turn over much of the responsibility for production to independent suppliers.
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Owner's Equity
the amount remaining after the value of all liabilities is subtracted from the value of all assets
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peak
the height of an economic expansion, when real GDP stops rising
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Premium
an amount to be paid for an insurance policy.
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production possibilities curve
A graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good.
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public goods
Goods, such as clean air and clean water, that everyone must share.
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Real GDP per capita
real GDP divided by the total population of a country
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Real GDP
GDP adjusted for inflation
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real value
the value of an amount of money in terms of what it can buy
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Recession
A slowdown in a nation's economy
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reserve ratio
the fraction of deposits that banks hold as reserves
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Roth 401(k)
an account setup at work where you make contributions with after-tax dollars, which is invested in mutual funds, and qualified distributions at retirement are received income-tax free
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Roth IRA
A personal savings plan; contributions are not tax-deductible; earnings are tax-free
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Rule of 72
The number of years it takes for a certain amount to double in value is equal to 72 divided by its annual rate of interest.
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savings account
a bank account that earns interest
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Stocks
shares of ownership in a company
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structural unemployment
unemployment that occurs when workers' skills do not match the jobs that are available
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Target Funds
mutual funds that automatically adjust the risk profile (from stocks to bonds) of the fund as the investor gets older
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trade deficit
An excess of imports over exports
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trade surplus
when a country exports more than it imports
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transfer payments
Benefits given by the government directly to individuals. Transfer payments may be either cash transfers, such as Social Security payments and retirement payments to former government employees, or in-kind transfers, such as food stamps and low-interest loans for college education.
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trough
the lowest point in an economic contraction, when real gross domestic product stops falling
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two income trap
Cost of living has doubled since 1970s. Relied on both parents working to support families.
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unemployment rate
the percentage of the labor force that is unemployed
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voluntary exchange
the act of buyers and sellers freely and willingly engaging in market transactions
Studied by 69 people
