Economic and Finance Term

Taxes

Money collected by the government to pay for public services like roads, schools, and healthcare.

Income Tax

A tax on the money you earn from working.

Social Security Tax

A tax that helps fund retirement benefits.

Medicare Tax

A tax that helps fund healthcare for older adults and people with serious health conditions.

Bank

A financial institution that stores money and lends it to others.

Fractional Reserve Banking

A system where banks keep only part of deposits and lend out the rest.

Interest

The cost of borrowing money or the reward for saving money.

Simple Interest

Interest calculated only on the original amount.

Compound Interest

Interest earned on both the original amount and previously earned interest.

Inflation

The gradual decrease in the value and purchasing power of money over time.

Interest Rates

The percentage charged for borrowing money or earned from saving money.

Recession

A period of economic decline lasting at least six months.

Credit Score

A number showing how trustworthy someone is with borrowed money.

Credit Utilization

The amount of credit used compared to the total available credit.

Currency

A system of money used to buy and sell goods and services.

Investing

Using money to buy assets in order to grow wealth over time.

Stocks

Shares of ownership in a company.

Bonds

Loans given to companies or governments in exchange for interest payments.

Diversification

Spreading investments across different assets to reduce risk.

Value

The worth people place on an object, service, or idea.

Compound Growth

Growth that increases faster over time because earnings continue earning more.

Asset

Something valuable that can increase wealth.

Time

The most important factor in growing wealth through investing and compound interest.

Sales Tax

A tax added to the money you spend on goods and services.

Capital Gain

A tax on profits earned from investments.