Econ and Personal finance

Medium of exchange

Money is any physical or virtual medium used for buying and selling goods and services.

Store of value

Money can be stored or saved to ensure future purchasing power.

Unit of account

Money acts as a standard unit by assigning value to goods and services.

Metallic money

The first and oldest form of money, primarily formed from precious metals like gold and silver.

Paper money

Receipts issued for deposits of metallic money that replaced direct transactions of gold.

Fractionally backed paper money

Money issued by banks that is not fully backed by gold or reserves.

Fiat money

Currency declared by a government to be legal tender, not backed by a physical commodity.

Treasury notes

Short-term debt instruments issued by the US government with fixed interest rates.

Bankers’ deposits

Account balances of commercial banks held by the central bank for the reserve requirement.

Currency

Cash in circulation used for everyday transactions.

Bank deposits

Money deposited in banks for safety and interest earnings.

Credit card

A card allowing quick borrowing from financial institutions, requiring future repayment with interest.

Personal income

Income earned by an individual before any tax deductions.

Personal disposable income

The portion of an individual’s income available after tax deductions.

Time value of money

The principle that money available now is worth more than the same amount in the future.

Simple interest

Interest calculated only on the principal amount.

Compound interest

Interest calculated on the principal plus accumulated interest.

Gross Domestic Product (GDP)

The total value of all goods and services produced by a country in a year.

Gross National Income (GNI)

The total income received by a country's residents, including income from abroad.

Credit rating

An assessment of creditworthiness based on an individual's credit history.

Consumer credit

Credit extended to individuals for personal use, such as credit cards and loans.

Debt

An amount of money borrowed that is expected to be paid back with interest.

Bank reconciliation statement

A document comparing personal bank records with the bank's records.

Financial institutions (FIs)

Organizations that provide financial services, including banks and investment firms.

Depository institutions

Banks that accept deposits and manage customers' savings.

Investment institutions

Organizations that help raise capital for businesses through securities.

Contractual institutions

Organizations that deal with insurance policies and pension funds.

Budget

An estimate of revenue and expenditure for a specific period.

Fixed costs

Expenses that do not change with the volume of production.

Variable costs

Expenses that vary with the level of production or sales.

Cost-benefit analysis

A method assessing the benefits of an action against its costs.

Net present value (NPV)

A method used to evaluate the profitability of an investment by comparing present values of cash inflows and outflows.

Risk management

A plan to lessen financial impacts of unexpected events.

Insurance

A financial product providing protection against risks and financial loss.

Estate planning

The process of arranging for the management and disposal of a person's estate after their death.

Trust

A legal arrangement in which one party holds property for the benefit of another.

Consumer Financial Protection Bureau (CFPB)

A US agency that ensures consumers understand their financial rights and responsibilities.

Diversification

The practice of spreading investments across various asset categories to reduce risk.

Rule of 72

A formula to estimate how long an investment will take to double based on its annual rate of return.

Financial aid

Monetary support for students to help pay for their education.

Federal Direct Loans

Loans provided directly by the US Department of Education.

Scholarships

Financial aid awarded based on merit, typically not requiring repayment.

Grants

Financial aid based on financial need, generally not needing to be repaid.