Economics, Finance, and Personal Budgeting: Key Concepts and Definitions

What is marginal utility?

The additional satisfaction gained from consuming one more unit of a good or service.

What distinguishes compound interest from simple interest?

Compound interest earns interest on previously accumulated interest.

What does the marginal tax rate represent?

The tax rate applied to the last dollar earned.

What is a chronological résumé?

A résumé organized by work experience over time.

What does a cost-of-living adjustment compare?

Living expenses between different cities.

What is the purpose of worker's compensation?

To provide income for employees who suffer workplace injuries.

What is the benefit of a flexible spending account?

It allows employees to pay for certain expenses using pretax dollars.

What three components are shown on a balance sheet?

Assets, liabilities, and net worth.

What defines a balanced budget?

Income equals the sum of spending and saving.

How do tax credits differ from tax deductions?

Tax credits reduce tax liability directly, whereas deductions reduce taxable income.

How are long-term capital gains typically taxed compared to ordinary income?

They are generally taxed at a lower rate.

What is the typical tax status of municipal bond interest?

It is usually excluded from federal income tax.

What does it mean to accelerate deductions?

Paying expenses earlier than necessary to receive tax benefits sooner.

What is the purpose of filing Form 1040X?

To amend a previously filed tax return.

What are the three core focuses of monetary asset management?

Liquidity, safety, and yield.

What characterizes a money market account?

It offers higher interest rates while maintaining liquidity.

How do stored-value cards function?

They function like small prepaid accounts.

What is a finance charge?

The total dollar cost of borrowing money.

What is the primary role of credit bureaus?

To collect and report credit information.

What do credit counseling agencies offer?

Debt management plans.

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

Chapter 7 involves the liquidation of assets, while Chapter 13 involves a court-approved repayment plan.

What is the typical liability limit for unauthorized credit card charges?

$50.

What is the difference between a secured and an unsecured loan?

A secured loan requires collateral, while an unsecured loan does not.

What characterizes an installment loan?

It requires regular payments over a set period of time.

What is a dealer holdback?

The portion of the dealer's profit that is returned to them by the manufacturer.

What is an express warranty?

A written guarantee provided by the manufacturer.

When is private mortgage insurance (PMI) required?

When the down payment on a home is below 20%.

What is the difference between front-end and back-end debt ratios?

Front-end ratio evaluates housing costs relative to income, while back-end ratio evaluates total debt relative to income.