Personal Finance Quiz #1

Standard of living

the necessities, comforts, and luxuries enjoyed or desired by an individual or family

average propensity to consume

the percentage of each dollar of income, on average, that a person spends for current needs rather than savings

Future Needs

Setting aside a portion of current income for future spending in savings or investments (retirement, home, education)

Wealth

the total value of all items owned by an individual, such as savings accounts, stocks, bonds, home, and automobiles

financial assets

intangible assets, such as savings accounts and securities, that are acquired for some promised future return

tangible assets

physical assets, such as real estate and automobiles, that can be held for either consumption or investment purposes

personal financial planning

a systematic process that considers important elements of an individual's financial affairs in order to fulfill financial goals

Financial Goals

results that an individual wants to attain, such as buying a home, building a college fund, or achieving financial independence

money

the medium of exchange used as a measure of value in financial transactions

utility

the amount of satisfaction received from purchasing certain types or quantities of goods and services

goal dates

target dates in the future when certain financial objectives are expected to be completed

Long-term goals

indicate wants and desires for a period covering about 6 years to the next 30 to 40 years.

short term goals

short-term financial goals are set each year and cover a 12-month period. they include making substantial, regular contributions to savings or investments in order to accumulate your desired net worth.

intermediate goals

bridge the gap between short and long term goals.

asset acquisition planning (header)

first category of financial planning.

liquid assets

cash, savings accounts, and money market funds

investments

stocks, bonds, and mutual funds

personal property

movable property (cars, furnishings, electronics, etc.)

real property

immovable property - land, house

Liability

something we owe, measured by the amount of debt we incur.

flexible (cafeteria) plans

the employer allocates a certain amount of money to each employee and then lets the employee spend that money on the benefits that suit his or her age, marital status, number of dependent children, and level of income.

monetary policy (not bolded)

programs for controlling the amount of money in circulation

fiscal policy

programs of spending and taxation

expansion

the phase of the economic cycle when real GDP increases until it hits a peak

peak

the phase of the economic cycle when an expansion ends and a contraction begins

trough

the phase of the economic cycle when a contraction ends and an expansion begins

inflation

a state of the economy in which the general price level is increasing

consumer price index (CPI)

a measure of inflation based on changes in the cost of consumer goods and services.

purchasing power

the amount of goods and services that each dollar buys at a given time.

contraction

the phase of the economic cycle when real GDP falls