Financial Literacy Final Review

needs

goods or services required for survival; the requirements for maintaining life

wants

our vast desire for goods and services that increase our quality of life but are not absolutely necessary

scarcity

limited resources to satisfy unlimited wants

factors of production

land, labor, capital, entrepreneurship

land

natural resources (dirt)

labor

workforce

capital

anything of value (including money)

entrepreneurship

ability to manage land, labor, and capital

substitute good

butter or margarine (goods that can be used in place of one another)

federal reserve

bankers bank: expand money supply by reducing the reserve equipment

GDP

gross domestic product: the total value of goods and services within the US

corporation

a company or group of people authorized to act as single entity

sole proprietorship

a single individual owns and operates the business

fiscal policy

involves government actions, primarily through spending and taxation, to influence the economy

monetary policy

involves government actions, primarily through spending and taxation, to influence the economy

deficit spending

When the government spends more than it takes in.

economic questions

who produces what, how, where, and at what cost?

command economy

government directs all economic questions

traditional economy

culture directs all economics questions

market economy

Supply & Demand (consumer and producer) directs ALL economic questions.

laissez-faire economy

little government interference (hands off)

sanctions

economic tool when dealing with foreign nations

opportunity cost

when you give up something to do something else

customer price index

measure of the economy, tracking common household items (eg. milk, bread, and butter)

business cycle

depression, inflation, recession, recovery

rules for saving

1. start early

2. diversify

3. hold

gross pay

the total amount earned before deductions such as taxes, insurance, and retirement contributions

net pay

the amount of money an employee takes home after deductions such as taxes, retirement contributions, and other withholdings have been subtracted from their gross pay

fixed deductions

A set dollar amount subtracted from an employee's gross pay, such as a fixed premium for health insurance.

variable deductions

the amount of the deduction may vary each year based on changes in those specific expenses, such as medical expenses

disposable income

What you have left over after you have paid everything (pay yourself first)

bounced checks

often called a “rubber check” it is when a check is returned to the original bank because there are not enough funds to cover the check in the amount (sometimes a fee is charged)

tax forms

1040, 1099, W-2, W-4

tax day

april 15th

bankruptcy

7 year rule

long-term saving plans

401k, 403B, Roth IRA, Mutual Funds

Credit Card Act of 2010

Prevents individuals under 21 from opening a credit card without a cosigner.

common apr

18-22%

credit bureaus

Experian, Equifax, and TransUnion

consumer protection

BBB vs. caveat emptor vs. lemon law

fafsa

free to fill out to get student aid for college

comprehensive coverage

insurance designed to pay for the repair or replacement of the policy owner’s car in the event of damage not resulting from an accident

Addendums

documents added to an original document to clarify a point

coverage provisions

an insurance that protects a certain thing for a specific value and time

policy riders

additions to a base insurance policy that expand coverage beyond the core offerings

premiums

a fee charged for advancing a loan

installment

When a debt is divided into several payments.

deductions

Taking a part out of a payment or an account to pay something else

indicators

a notable or significant fact that can lead you to analyze something else

liability

something owed or an obligation

a part of a person’s income remaining after deducting income taxes

casualty

A thing or group that suffers loss as a result of an event.

collision

A clash or conflict involving objects such as cars

term life

A type of life insurance that provides a payment upon death for a specific period of time.

allowances

a fixed payment made on a specific date or time period

liquidate

to sell everything a company owns in order to pay outstanding debts

inflation

the increase in the cost of goods and services over time, is usually measured by Consumer Price Index

Stagflation

when a situation in a country country occurs when you have both high inflation and high unemployment

transition

an economic theory that links population changes to changes in areas such as health care and education

mutual fund

an investment firm that manages finances and sells shares to the the public

compound interest

computed on the original amount and then added and computed again over time

house equity loan

a second mortgage loan that is secured by the value in your home

401 K

a type of an employer sponsored benefit for retirement

audit

an in-depth examination of a person’s or company’s account’s

balance sheet

a summary of the finances of a person’s or company’s during a specific period of time

inventory

the value of materials and goods owned by a firm

probe

an investigation of an event on involving a person or company

mortgage

a financial institution loans you an amount of money in order to buy something — usually refers to a home or other property or large item (ex: boat)

caveat emptor

“buyer beware” the consumer is responsible to make sure you are making a wise purchase and you are responsible for the consequences of a poor purchase

lemon laws

a statute that protects consumers from defective products

debit card

a bank card that is used in transaction but is not a credit card

certificate of deposit

a receipt given to an individual who opens an account at an financial institution or invests some sort of money