Finance Exam - Study Guide

Fiat money

money deemed by the government to be legal tender

International trade

the exchange of goods and services among nations

Budget deficit

when the government spends more money than it gets in revenue

Deflation

a situation in which prices are declining

Inflation

a general and progressive increase in prices

Budget surplus

when government gets more revenue than it spends

Regulator

a government role that plays to protect investors, workers, and consumers in the environment

Patent

the exclusive right granted to an inventor to prevent anyone else from using the invention for a period of time

Copyright

an exclusive right granted to an author

Intellectual Property

a person’s original idea or invention

Trademark

legal rights given to a company to protect the company’s name and reputation

Indicators

statistical economic values that help measure variables in the economy

Gross domestic product GDP

the value of all final goods and services produced in a country in a given period of time

Consumer price index CPI

measures the cost of a basket of goods and services for an urban family

Recession

an economic downturn that lasts for 6 months

Trough

a low point in a business cycle

Absolute advantage

the ability of a country to produce more of a product than another country can

Comparative advantage

the ability of a country to produce a product at a lower opportunity cost than another country

Balance of trade

the difference between the values of a country’s imports and exports in a specific period of time

Money supply

the total amount of money in circulation in the country

Federal reserve system FRS

regulates the US banking system and guides monetary policy

Embargo

used to restrict imports and exports when there is a health issue

Quota

a restriction on the quantity or value of imported goods

Tariff

increases the price of imported products which helps domestic companies compete

Protectionism

the practice of using barriers to free trade

Interdependent

they need each other to create the goods and services produced in a nation

Specialization

when tasks are divided among different workers to help increase productivity

What are the 3 functions of money?

medium of exchange, unit of value, and store of value

medium of exchange

when you purchase the things you want, you use money as a medium of exchange

unit of value

helps you compare prices on the goods and services you want to buy

store of value

you can accumulate and save money without losing value

Securities and Exchange Commission(SEC) regulates?

the sale of stocks and bonds

Occupational Safety and Health Administration(OSHA) does?

issues guidelines for worker safety

Equal Employment Opportunity Commission(EEOC) regulates?

hiring, firing, and promotions based on ability and not age or gender

Food and Drug Administration(FDA) regulates?

the safety and labeling of food, drugs, and cosmetics

Consumer Product Safety Commission regulates?

products other than food, drugs, and cosmetics and can recall unsafe products

Federal Trade Commission(FTC) protects?

consumers by enforcing laws that regulate competition, consumer protection, and the economy

Environment Protection Agency(EPA) protects?

the health of people in the u.s. and environment

FICA stands for??

Federal Insurance Contribution Act

What are the 3 goals of an economy?

economic growth, stable prices, and full employment

What are the 3 economic indicators?

gross domestic product, consumer price index, and unemployment rate

what is the order of the business cycle?

expansion, recession, trough, and recovery

What countries are included in NAFTA?

Canada and Mexico

discretion

judgement

Inelastic demand

when price has little influence on demand for a product

demand elasticity

the degree to which demand is affected by price

fungible

can be easily substituted for a good of equal price

economics

the study of the decisions that go into making, distributing, and using goods and services

allocates

distributes

economy

how a nation makes decisions to allocate its resources

derivatives

securities that involve managing financial risks

supply

how much producers are willing and able to produce at a certain price

price floor

a minimum price set by the government that can be charged for goods and services

price ceiling

a maximum price set by the government that can be charged for goods and services.

scarcity

the economic principle that requires people to decide which goods and services to use and not to use due to limited resources and unlimited wants

discretion

when demand for a product is affected by price

demand

how much consumers are willing and able to buy at a certain price

opportunity cost

what you give up to get something else you want

marginal coat

the cost of obtaining an item

Financial market

A mechanism that provides the means for purchasing and selling stocks, bonds, commodities, and other financial instruments

Stock

Ownership shares in a corporation

Bond

Money loaned to a company or government

What are the 2 financial exchanges?

New York stock exchange and the Electronic NASDAQ

What factors influence the market?

The economy, political unrest, and government policies

What are 3 examples of depository institutions?

Commercial banks, credit unions, and savings and loan associations

What are 3 examples of non-depository institutions?

Insurance companies, investment bankers, and mutual funds and stock brokerage firms

Incentive

Encourages specific behavior and helps to motivate individuals to take specific action

How do businesses use incentives?

Businesses offer incentives through recognition and wages and through savings and rewards programs

Liquidity

the ability to easily convert financial assets into cash without loss of value

Accumulate

to collect

Time value of money

the increase of an amount of money due to earned interest or dividends

Personal financial planning

arranging to spend, save, and invest money to live comfortably, have financial security, and achieve goals

Goals

the things you want to accomplish

Present value

the amount of money you would need to deposit now in order to have a desired amount in the future

Annuity

a series of equal, regular deposits

Estimate

to make an approximate calculation of

Interest

the price that is paid for the use of another’s money

Consumer

a person who purchases and uses goods or services

Principal

the original amount of money on deposit in a savings account

Values

the beliefs and principles you consider important, correct, and desirable

Consider

to weigh opportunity costs

Service

a task that a person or a machine performs for you

Future value

the amount your original deposit will be worth in the future based on earning a specific interest rate over a specific period of time

Consume

to use up

Good

a physical item that is produced and can be weighed or measured

Demand

the amount of goods and services people are willing to buy

Economics

the study of the decisions that go into making, distributing, and using goods and services

Inflation

a general rise in the level of prices for goods and services over time

determine your current financial situation, develop your financial goals, identify alternative courses of action, evaluate your alternatives, create and use your financial plan of action, and review and revise your plan

What are the 6 steps to the financial process?

obtain, plan, spend wisely, save, borrow wisely, invest, manage risk, and plan for retirement

What are the 8 strategies for achieving your financial goals?

Evaluating risk

when you make a financial decision and you deal with a certain financial risk

Fixed expenses

costs that typically remain the same

Variable expenses

costs that can change regularly

Short term goal

takes one year or less to achieve

Intermediate goal

takes two to five years to achieve

Long term goals

takes more than a five years to achieve

consumable goods

purchases that you make often and consume, or use up, quickly

example of consumable good

food and products, like shampoo and conditioner

Durable good

expensive items that you do not purchase often

example of durable goods

cars and large appliances, like a fridge