Personal Finance and Economic Indicators

Flashcards for reviewing personal finance concepts and economic policies.

Define personal finance.

The practice of managing financial resources (income, expenses, savings, investments, and debt) to achieve financial goals and improve financial well-being.

What is an auto loan?

A type of installment loan used to purchase a vehicle, repaid over a set period.

How do you calculate auto loans?

Subtract the down payment amount from the price of the vehicle.

Describe credit cards.

Lines of credit for purchasing, with options to pay in full or make minimum monthly payments; essentially loans from banks/credit unions repaid over time.

Name three types of credit cards.

Regular credit cards, secured credit cards, and rewards credit cards.

What information is typically found on a credit card statement?

Transactions, interest changes, conditions, fees, and payment obligations.

What is the purpose of credit card disclosures?

To outline state rights and how to report any issues that may arise.

What is a general downside of owning a credit card?

It can create debt.

What are the advantages of a savings account?

More accessible funds, earns interest (around .41%), and is FDIC assured.

Name alternative savings vehicles.

CDs (Certificates of Deposit) and MMAs (Money Market Accounts).

Describe Certificates of Deposit (CDs).

Require a fixed deposit for a set period with a specific interest rate; FDIC assured but harder to add and inaccessible during the term.

Describe Money Market Accounts (MMAs).

Offer higher interest rates, accessible via checks and transfers, and FDIC assured; rates fluctuate across institutions and harder to add to the balance.

What factors should be considered when choosing a savings account?

Fees, minimum balance requirements, interest rates, and availability of online banking/mobile app features.

How does a savings account differ from a checking account?

Savings accounts earn interest, while checking accounts offer more access to funds and have lower interest rates.

Explain what a mortgage is.

An agreement where a lender gives the right to a property in exchange for repayment of borrowed money plus interest; failure to repay allows the lender to take the property.

What are the different types of mortgages?

Fixed-rate mortgages and variable-rate mortgages.

How do fixed-rate and variable-rate mortgages differ?

Fixed-rate mortgages have constant interest rates, while variable-rate mortgages have fluctuating interest rates.

List economic indicators.

GDP (Gross Domestic Product), inflation, unemployment, and interest rates.

What does a growing GDP indicate?

A healthy economy.

What does a negative GDP indicate?

A recession.

How is inflation most commonly measured?

Through the CPI (Consumer Price Index).

What does a high unemployment rate suggest?

A weak economy.

What does low unemployment rate suggest?

A healthy job market.

What does the interest rate represent?

The cost of borrowing for businesses and consumers, heavily impacting the overall economy.

Define fiscal policy.

The power of Congress to tax and spend; raising taxes slows the economy, raising government spending grows the economy.

Name the different types of fiscal policy.

Expansionary and contractionary.

Describe Expansionary fiscal policy.

Used during contractions, meant to grow the economy and reduce taxes, or increase government spending.

Describe Contractionary Fiscal Policy.

Used during expansions, meant to slow down the growth of the economy, increase taxes, or reduce government spending.

Define monetary policy.

Lowering the discount rate and required reserve ratio and buying bonds - used to grow and stimulate the economy.

Define monetary contractionary policy

Increasing both the discount rate and required reserve ratio and selling bonds and it’s used to slow down the economy usually in the face of inflation so it doesn't completely crash.

When would you use fiscal policy?

You use fiscal policy in situations where you want to influence the economy during s like a recssion or to fight off inflation

What are the key effects of fiscal policy?

It has an immediate effect because of the influence on consumer spending, it has a lot of long term benefits like boosting long term economic growth but it can also put you in debt.

When would you use monetary policy?

You use monetary policy when you want to manage periods of inflation, want to support economic growth and respond to economic shocks like a global financial crisis.

What are the key effects of monetary policy?

Some effects are that it can have a delayed impact meaning it will take some time to work through the economy, it can impact financial markets and influence investment decisions and ut can create financial instability