Consumer Economics Final Exam

Economy

A system used to determine how limited resources are distributed.

Command Economy

An economic system where the government decides what to produce, how to produce it, and who gets it.

Market Economy

An economic system where consumers and businesses make decisions based on supply and demand

Mixed Economy

An economy that combines elements of both market and command systems

Scarcity

The condition that occurs because resources are limited while wants are unlimited.

Surplus

When supply is greater than demand.

Shortage

When demand is greater than supply.

Equilibrium Price

The price at which quantity supplied equals quantity demanded.

Inflation

A rise in the overall price level of goods and services.

Gross Domestic Product (GDP)

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

Unemployment Rate

The percentage of people willing and able to work who cannot find a job.

Consumer Confidence

How optimistic consumers feel about the economy and their financial future.

Fiscal Policy

Government decisions on taxes and spending.

Monetary Policy

Federal Reserve actions that control the money supply.

Budget Surplus

When government revenue exceeds spending.

Budget Deficit

When government spending exceeds revenue.

Progressive Tax

Higher income is taxed at a higher rate.

Regressive Tax

Lower income is taxed at a higher rate.

Proportional Tax

Everyone is taxed at the same rate regardless of income.

Gross Income

Income earned before taxes and deductions.

Net Income

Income after taxes and deductions.

Fixed Expenses

Expenses that stay the same each month.

Variable Expenses

Expenses that change month to month.

Budget

A plan for managing income and expenses.

Direct Deposit

When an employer deposits wages directly into a bank account.

FDIC

Federal agency that insures bank deposits up to $250,000.

Credit

The ability to borrow money and repay it later.

Credit Score

A number that represents a person’s creditworthiness.

Three C’s of Credit

Character, Capital, and Capacity.

Character

Your history of paying bills on time.

Capital

Assets or property owned by a borrower.

Capacity

A borrower’s ability to repay debt based on income.

Lender

The institution that provides the loan.

Borrower

The person who receives the loan.

Credit Bureau

A company that collects and reports credit information.

Money Market Account

Low-risk savings account with limited growth.

Certificate of Deposit

A savings account that locks money in for a set period.

Mutual Fund

An investment made up of a mix of stocks or bonds.

Bond

A loan made to a company or government.

Stock

Ownership in a company

Capital Gains

Profit made from selling an investment.

Dividends

Payments made to shareholders from company profits.

Inflation Risk

The risk that investment returns won’t keep up with inflation.

Roth IRA

Retirement account where withdrawals are tax-free.

Traditional IRA

Retirement account with tax-deductible contributions.

401(K)

Employer-sponsored retirement plan ( private sector).

403(B)

Employer-sponsored retirement plan ( public sector).

Premium

The amount paid for insurance coverage.

Deductible

The amount paid out of pocket before insurance pays.

Liability Insurance

Covers injuries and damage to others.

Collision Insurance

Covers damage to your car from an accident.

Comprehensive Insurance

Covers non-collision damage ( theft, weather,etc.).

Security Deposit

Money held by a landlord to cover damages.

Sticker Price

The dealer’s initial asking price for a vehicle.

Redistribution of Income

Taxing higher-income earners more to fund programs that help lower-income individuals.

W2

Summarize a person’s income and tax withholding for a year at one place of business( must be sent by January 31st).

W4

Declares how many allowances you want to claim ( completed at the end beginning of a job, and renewed throughout the job).

1040EZ

Income, federal taxes paid to every place of work, deductions.

IL-1040

Income, state taxes paid to every place of work, deductions.

How long does bankruptcy stay on your credit report?

10 years.

100/300/50

$100,000: the most insurance covers for injuries to one person.

$300,000: the most insurance covers for injuries to all persons involved.

$50,000: the most insurance covers for property damage.

50/30/20 Rule

50% Needs, 30% Wants, 20% Savings.

How long does negative information stay on your credit report?

7 years.

What is APR?

“Annual Percentage Rate”; yearly cost of borrowing money, shown as a percentage, that includes the interest rate plus lender fees.