econ

Capitalism

An economic system based on private ownership of capital

free enterprise

An economic system in which individuals and businesses are allowed to compete for profit with a minimum of government interference

Lure of profits

Profit is motivation and competition is regulation.

Banking Act of 1933

The law that established the Federal Deposit Insurance Corporation (FDIC) to insure bank deposits. It also prohibited commercial banks from selling insurance or acting as investment banks.

Banking Act of 1935

Made the FDIC permanent

250K

How much does the FDIC currently insure up to?

Sarbanes-Oaxley Act of 2002

restricted accounting firm practices and required CEOs and CFOs to certify quarterly and annual reports.

Dodd-Frank Wall Street Reform and Consumer Protection Act - 2010

Required significant changes affecting the oversight and supervision of financial companies

Smoot-Hawley Tariff Act - 1930

legislation passed in 1930 that established very high tariffs. Its objective was to reduce imports and stimulate the domestic economy, but it resulted only in retaliatory tariffs by other nations

General Agreement on Tariffs and Trade

What does GATT stand for?

GATT

A United Nations agency created by a multinational treaty to promote trade by the reduction of tariffs and import quotas in 1947/1948.

World Trade Organization (WTO)

a trade organization that replaced the old General Agreement on Tariffs and Trade (GATT) in 1995

European Union

An international organization of European countries formed after World War II to reduce trade barriers and increase cooperation among its members. Created in 1993.

North American Free Trade Agreement (NAFTA)

Agreement signed by the United States, Canada, and Mexico in 1994 to form the largest free trade zone in the world.

USMCA (United States-Mexico-Canada Agreement)

Replaced NAFTA

Intelectual property

intangible property that is a result of something created by the mind.(trademarks and patents)

GDP

Gross Domestic Product- the total market value of all final goods and services produced annually in an economy. C + I + G + (X - M), where C is Consumption, I is Investment, G is Government Spending, and (X - M)

exchange rate

The measure of how much one currency is worth in relation to another.

Foreign exchange markets

markets dealing in buying and selling foreign currency for businesses that want to import goods from other countries

World Bank and IMF

What two organizations were created at Brentton Woods, post WWII?

International Monetary Fund (IMF)

An international organization that acts as a lender of last resort, providing loans to troubled nations, and also works to promote trade through financial cooperation. 191 Countries are members

World Bank

A specialized agency of the United Nations that makes loans to countries for economic development, trade promotion, and debt consolidation. Its formal name is the International Bank for Reconstruction and Development.

Bretton Woods

Representatives from 44 countries met in New Hampshire to design a new international monetary system; resulted in the establishment of the IMF and the World Bank.

Devaluation

lowering the value of a nation's currency relative to other currencies

Balance of Trade

The difference between a country's total exports and total imports

Stages of Business Cycle

What goods and services are to be produced and in what quantities?

How will the goods and services be produced? For whom will the goods and services be produced? Three basic economic questions that must be answered by every economic system

Embargo

a government order imposing a trade barrier on a certain imported good.

Protectionism

Economic policy of shielding an economy from imports.

General Partnership vs Limited Partnership

General, they both have unlimited liability, but in limited the general partner carries the most liability

Public vs Private Corporations

In a public corporation, one is allowed to purchase shares; they are not allowed to in a private.

501(c)(3) organization

An IRS tax code classification that applies to most interest groups; this designation makes donations to the group tax-deductible but limits the group's political activities.

Herbert Hoover

Which President signed the Smoot-Hawley Tariff Act?

Stanford

Where did Herbert Hoover go to college?

False

T/F Non-profits pay federal taxes?

The Federal Reserve

Regulates and makes a profit from money

The Banker's Bank

Also known as the Federal Reserve because it loans money to banks, and banks buy stock in the Fed.

Panic of 1907

A financial crisis that happened when the New York Stock Exchange crashed. Panic spread through the nation, resulting in many runs on banks and bank failures. It led to the creation of the Federal Reserve. Also known as the Bankers' Panic.

The Federal Reserve Act of 1913

What act was passed because of the Panic of 1907?

Woodrow Wilson

What president passed the Federal Reserve Act of 1913?

False, decentralized, centralized bank

True or False: The Federal Reserve is a centralized bank?

JP Morgan

Who bailed out the United States Government during the Panic of 1907?

Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Saint Louis, Minneapolis, Kansas City, Dallas, San Francisco.

What are the 12 Federal Reserve Banks?

Easy

Is the Federal Reserve following a tight or easy monetary policy?

1. Employer (pensions/401(k) matches) 2. Social Security 3. Personal savings

What three aspects make up the retirement 3-legged stool/chair?

April 15 annually

When is the 1040 due?

First day of work

When do you fill out the W4?

January of the following year

When do you fill out the W2?

4 years

How long is the term of the Fed Chair?

14 years

How long are the terms of the board of governors?

The president

Who appoints the board of governors?

The Senate

Who confirms the board of governors appointed by the president?

New York

Which reserve district bank president votes in the Federal Market Committee every time?

Fractional Banking

The ability of banks to hold a fraction of their customers' deposits at any time, thus allowing them to lend out money and earn interest. How banks create money.

7%

What is the current prime rate?

21.5%

What is the US Prime Rate record high?

Janet Yellan

Who is the most recent previous chair?

Ben Bernanke

Who was the chair during the 2008 crisis?

Paul Volcker

To break the back of inflation, he raised the federal funds rate to a peak of 20% in 1981, causing a severe recession with high unemployment, but ultimately succeeded in lowering inflation to roughly 3.8% by 1983.

Alan Greenspan

Former Federal Reserve chair in the 90s coined the phrase "irrational exuberance"

Jerome Powell

Who is the current chair?

Stable Prices (Inflation Rate 2%) and Full Employment (Unemployment rate of 5% or lower)

What are the two parts of the dual mandate of the Fed?

Functions of the Fed

What creates and implements monetary policy?

1. Monitors Interest rates 2. Ensures compliance with Bank Regulations by member banks 3. Provides paper currency 4. Clears checks 5. Acts as the fiscal agent for the federal government 6. Holds reserves and sets reserve requirements (excess reserves, fractional reserves) 7. Controls Money in circulation (Monetary Policy)

What are the 7 functions of the Fed?

Fiscal Policy

Government policy that attempts to manage the economy by controlling taxing and spending.

Monetary Policy

Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.

Federal Advisory Council

A 12-member board of bankers selected from each Federal Reserve district to advise the President (of 1/12 of the Federal Reserve Banks) on business and financial issues. All 12 of the presidents have one of these.

1. Reserve Requirements 2. The Discount Rate 3. Open Market Operations 4. Interest on Reserve Balances (IORB)

What are the 4 tools the Fed uses to control the level of spending in the economy?

3%

How much higher is the Prime Rate than the Discount Rate?

Fed Funds Rate

The target interest rate at which commercial banks lend each other reserve balances overnight. AKA the "Overnight Rate"

Family Medicaid Leave Act

A U.S. law that entitles eligible employees to unpaid, job-protected leave for specific family and medical reasons. Doesn't say you get paid. You get 6 weeks of unpaid leave if you've worked 1,000 hours the year prior.

Pension Plans

Company plans that provide retirement income for their workers

Sin Tax

federal tax on alcohol and tobacco

Hamburger Tax

Tax on fast food

Vesting

When you have earned the permanent legal right to a portion or all of your accrued retirement benefits, which cannot be forfeited, even if you leave the employer.

W4

What do you fill out in order for the government to know how much to tax you?

Progressive Tax

Tax proportional to your income, total with a blended rate. (Going over into another tax bracket does not necessarily make you pay a lot more taxes; it's blended to be proportional to your income)

Regressive Tax

A tax whereby people with lower incomes pay a higher fraction of their income than people with higher incomes. Opposite of Progressive Tax.

6.2%

How much of your income is deducted for Social Security?

1.45%

How much of your income is deducted for Medicare?

Federal Insurance Compensation Act (FICA)

Official name for Social Security and medicare taxes

$176,000

What is the Social Security Cap?

401(k)

A qualified retirement plan sponsored by an employer (employer usually matches this). This is deducted before taxes from your income.

Roth IRA

A personal savings plan; contributions are not tax-deductible; earnings are tax-free

Deductable

the amount of money you pay out-of-pocket for a covered expense before your insurance company starts paying.

Insurance Premiums

The amount of money you pay to an insurance company to maintain an active policy and have coverage against financial risk.

Needs

Things essential for survival.

Wants

Goods and services not essential for survival

Economics

The study of the production, distribution, and consumption of goods and services, focusing on how individuals, businesses, and governments make choices in the face of limited resources to satisfy unlimited wants.

Microeconomics

the study of individual, households, and firms make decisions

Macroeconomics

The study of the economy as a whole

Opportunity Cost is Opportunity lost

Why is there no free lunch?

land, labor, capital, entrepreneurship

4 Factors of Production

Land

all natural resources used to produce goods and services

Labor

Human effort directed toward producing goods and services

Capital

the tools, equipment, machinery, and factories used in the production of goods and services

Entrepreneurship

the process of starting, organizing, managing, and assuming the responsibility for a business

Rent

What is the product of land?

wages

What is the product of labor?

interest

What is the product of Capital?