Personal Finance - Unit One: Income and Money

Flashcards covering definitions of income, non-money and money income, characteristics and functions of money, sources and flows of income, and factors determining income levels from Personal Finance Unit One.

What is the general definition of income in personal finance?

The flow of goods and services including money available for meeting goals, representing the total earnings of individuals or households from all earned and unearned sources.

What are the two main forms of income?

Money income and non-money income (also known as income-in-kind).

How is non-money income defined?

The value of goods, services, and benefits received by an individual or household that are not in the form of cash, used to meet family goals.

What is household production in the context of non-money income?

The value of work that is done in the home for which the family does not pay.

What does the non-money income category of household facilities include?

The value of all the things that are owned and used by the family to meet the goals of the family.

What are community facilities?

Facilities that are communally owned but are used by individuals and families to meet their goals.

What other forms of non-money income exist besides household production and facilities?

Public services (e.g., free education, health care), employee benefits, and gifts and donations.

Why are non-money goods, services, and facilities considered income?

Because if they are not available, the money manager would have to use cash in their stead; thus, they free money income for meeting other household needs.

How do Lipsay & Chrystal (2020) define money income?

The amount of money received by an individual or household in a given period of time in return for services rendered.

Why is money income referred to as legal tender?

It is the accepted medium of exchange for goods and services at the marketplace in a particular jurisdiction.

Where does the best value of money lie in personal finance?

In the things that the money will be used to purchase to improve the living conditions of the family and the individual.

According to the notes, how does money kept in a bank account contribute to a family's wellbeing?

It contributes little to the family's wellbeing, except if it is to serve as savings.

What are the two physical forms of money listed in the lecture?

Notes and coins.

What is the medium of exchange function of money?

It serves as something acceptable for the exchange and payment of goods and services in a jurisdiction, explaining what it means for something to be money.

What is the store of wealth or store of value function of money?

It allows the economic value of an item to be kept intact over time, enabling individuals to use income earned today to purchase items in the future.

How does money function as a standard for measuring value?

It provides a common standard to compare the worth of goods and services and allows dissimilar items to be added up into a single monetary value.

What is money's function as a standard for deferred payments?

It provides a way to measure the value of future payments more easily than using any other commodity.

What does it mean for money to be divisible?

It can be easily divided into smaller units without losing its value, facilitating payments for goods and services.

Why must money be durable?

It must be made of strong material to withstand wear, tear, and daily handling from frequent use.

What does uniformity mean as a characteristic of money?

Every unit of money must be identical in value and interchangeable with another of the same denomination, with no note or coin worth more than another of equal denomination.

What does the portability characteristic of money require?

Money must be light enough to be easily carried or conveyed from one place to another for transactions.

What is regular income?

Money earned at regular intervals in specific amounts within a rigidly defined period, such as monthly salaries or weekly/daily wages.

Why is regular income easier to manage than irregular income?

The manager is sure of how much receipt will be available within the budgetary period.

What is irregular income (variable or fluctuating income)?

Income that varies in both amount and interval of receipt, making it difficult to manage because neither amount nor timing is known.

What human capital and skills factors determine an individual's level of income?

Education level, specific skills and expertise, experience and seniority, and natural talent and effort.

According to Mankiw (2021), what career and industry factors determine income levels?

Occupation/career choice, demand and supply, location, and sector and company size.

What macroeconomic and social factors influence income levels?

Economic trends/conditions, government policy and regulation, technological advancements, and discrimination and inequality.