Government/Economics Review

Semester 2 exam

Capitalism is known as the ____________________ system.

free enterprise system

Define the “profit motive”.

desire to make money, principle in which Capitalism is based

What are the four factors of production?

land, labor, capital, management

In a Capitalist System, how is the price of a product determined?

Supply and demand

Explain the principle of “supply and demand”.

higher the supply, the lower the price, the higher the demand, the

higher the price, supply and demand sets prices in Capitalism

Socialism and Communism are also known as __________________ economies.

Command Economy

Who is Adam Smith?

wrote “The Wealth of Nations” father of the free enterprise system

Define “entitlements” and “controllables”.

entitlements required by law; controllable deducted yearly automatically

9. Define “fiscal policy” and “monetary policy”

Fiscal-use gov’t spending and taxing to influence the economy

Monetary-use gov’t to print more/less money or have banks loan more out

What factors influence financial decisions?

age, values, peers

What is the purpose of goal setting in the financial planning process?

to provide direction for planning and action

What is a “fixed expense”, “variable expense”, and “periodic expense”?

fixed - amount of money (bills) that is exactly the same every month

variable - expenses that fluctuate

periodic - every once in a while

Why should one diversify investments?

spreading investments around to reduce risk of losing it all

What is a “credit limit”?

maximum amount one can spend on credit card

Names some types of credit.

car loan, mortgage, gas credit card

What is the basic rule for the rate of return involving risk and reward?

the higher the risk, the higher the rate of return

What is compound interest?

process of earning interest on interest

Why is paying with a credit card usually a bad idea?

high interest rates, high balance

What is an “APR”?

total % it costs you to use credit card in interest per year

What are things that effect your auto insurance rates?

mileage, driving record, repairs, credit report, location you live

What is a “deductible”?

your out of pocket costs on a claim

What insurances are typically offered by employers?

disability and health

At your age, what two types of insurances are needed and required by law?

automobile and health

What is “insurance”?

chance of loss from some type of behavior

This is the term for the maximum amount covered by an insurance policy?

coverage limit

What is a “claim”?

request for payment to recover from financial loss of some kind

What types of documents should be stored at home in a safe place?

checking account statements, savings account statements, tax documents, credit and debits card info

What is the purpose of insurance?

reduces risk

What are five items on a credit application?

social security number, credit report, income, debt, expenses

How can one increase their credit score?

pay bills on time, steady job. Solid income, little debt, build assets

What is the difference between a debit card and a credit card?

debit card- your money used and deducted from account

Credit card-using someone else’s money and borrowing, interest

When going to get auto insurance, what info must one bring?

vehicle ID number, driving record. Social security number

What could cause a credit score to drop?

late loan payments, too many loans

What is a “budget”?

plan for managing money

What is “cash flow”?

amount of money earned and amount of money spent

How can one get lower auto insurance premiums?

drive less, clean driving record, higher deductible, good grades

What is liability insurance?

insurance protects against lawsuits

What is the term for a few corporations dominating a particular industry?

oligopoly

What is a deductible?

out of pocket money paid with an insurance claim

What is a federal deficit?

Federal government spends more than it brings in from taxes

What did Karl Marx believe?

Capitalism must be overthrown

What is “risk”?

Chance of loss; reason we buy insurance

Name three types of information people need to apply for credit.

TAX RETURNS, INSURANCE PAPERS, TITLES, RECEIPTS, WARRANTIES

Why should someone diversify investments?

Literally not put all of their eggs in one basket; if one investment

fails, others will rise

Name two types of documents people should keep in their files.

Name, DOB, address, income, references, phone

List three strategies one can implement over the next five years to build a good credit history.

get good job, make more money, no debt for the future, pay bills

on time

What would be the result of the Federal Reserve buying bonds and securities?

increases the money supply and lowers interest rates

what is net income?

describes your earnings after taxes, benefits and other payroll deductions

Buying on credit cause the buyer to pay more or less?

more

In the future a dollar will be worth more or less?

less

Where will a bank customer get the most up to the minute information on the amount of money in their accounts?

check register

What percent of Americans live paycheck to paycheck?

70%

What is mechanization?

Process of using machines to replace hand tools

What is industrialization?

using machinery in a location to produce large quantities of goods

A tax on imported goods is called?

tariff

Process of putting money aside for the purpose of making more money is called?

investment

What is a collectible?

Baseball cards, coins, stamps, antiques, paintings, ect

What is principal when applied to a loan?

Starting amount of loan without interest

What is a loan term?

Length of loan in time

What is interest rate?

price you pay for borrowing money or the return you get for saving money

Which debt cannot be forgiven in a bankruptcy case?

student loans, alimony