unit 1 vocab (ECON)

assets

a resource owned by an individual or company that can generate a positive economic benefit

budget

an estimate of anticipated income, expenses, and revenues for a period of time

checking account

a financial account that is used to make everyday purchases without the use of cash

credit

the ability to buy goods or services now with the promise to pay later

credit card

a type of payment card that lets the consumer borrow money from a bank or credit card company

credit limit

the maximum amount of money a lender will allow you to spend on a credit card or line of credit

credit score

a number that represents an individual’s financial and credit standing

debit card

a payment card that deducts funds directly from your checking account when used

deductible

out-of-pocket costs before insurance coverage starts

deduction

an item or expense that can reduce the taxes a person owes in a given year

emergency fund

savings set aside specifically for paying unexpected expenses

gross pay

the total amount of pay an employee recieves before any deductions

interest

the price paid for borrowing money; expressed as a percentage rate overtime

investment

a purchase of stocks, bonds, real estate, or other assets to aquire capital gains, dividend distributions, or interest payments

mortgage

a loan in which the lender gives the borrower a sum of money to purchase property or real estate

net pay

an employee’s earnings total after all deductions are subtracted from their gross pay

premium

an extra cost paid alongside the base price in the event of special circumstances (high demand, enhanced value, etc)

savings account

a type of bank account that safely stores money while accruing interest overtime

tax return

a reimbursement given to taxpayers who have overpaid their taxes

taxable income

the amount of money that is subject to tax

W2 form

• Wage and Tax Statement

• a form filled out by employers to report employees’ total annual earnings and taxes withheld over the last year (copies sent to employee and government)

W4 form

• Employee’s Withholding Certificate

• a form filled out by employees to instruct employers how much tax to withhold on their employers’ behalf

withholding

withholding is the amount of federal income tax withheld from your paycheck

annual percentage rate (APR)

the amount of interest that will apply on top of the amount you owe yearly (total annual cost of borrowing money yearly)

bonds

• IOU

• a type of security where the issuer owes the holder a debt

collateral

an item of value that a lender can seize from a borrower if they fail to repay a loan according to the agreed terms

compound interest

the interest accumulated from the original principal sum and previously accumulated interest

credit union

a member-owned non profit cooperative financial institution for the purpose of maximizing the economic benefit of its members

creditor

• an entity that lends money or extends credit to individuals or businesses, with the expectation of repayment

• ex: if you owe a debt to someone, they are a creditor

default

a failure to meet the legal obligations of a loan agreement

disposable income

the amount of money you have left over from your total annual income after paying federal, state, and local taxes

diversification

a technique of allocating portfolio resources or capital to a variety of investments, with the goal to mitigate losses

dividend

• a portion of a company’s profit paid to shareholders

• ex: stocks

Federal Deposit Insurance Corporation (FDIC)

protects depositors from losses in the event of a bank failure or closing, ensuring that depositors do not lose their money

fixed expenses

an expense whose total amount does not change when there is an increase in activity such as sales or production

foreclosure

a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender

Internal Revenue Service (IRS)

a U.S. agency which is responisble for collection of taxes and reinforcement of tax laws

overdraft

when an account holder can do a transaction even though their account balance is zero

secured loan

a loan backed by collateral

simple interest

• a fixed proportion of the principal amount borrowed or lent over a period of time

• the absence of compounding

• calculated only on the principal

stock

• a financial instrument representing partial ownership in a company

• dividend

stock exchange

• a marketplace where securities, such as bonds and stocks are bought and sold

stock broker

individuals who buy and sell stocks and other securities for retail and institutional clients

unsecured loan

• a loan extended without the need for any collateral

• supported by a borrower’s strong creditworthiness and economic stability

variable expenses

expenses directly tied to production volume, such as raw materials, direct labor, etc, which rise or fall as output changes

securities

• a tradable financial asset

• can be bought and sold; traded by investors

• ex: financial instruments like stocks, bonds, and mutual funds