Economics Review Flashcards

Flashcards covering key concepts from economics lectures on saving, borrowing, insurance, government roles, and international trade.

What is a life course?

The sequence of life stages related to age that influence financial decisions.

What is saving?

Postponing consumption until later by putting money in a savings account or piggy bank.

What is saving for a purpose?

Saving for a specific expensive item you cannot currently afford.

What is precautionary savings?

Saving money as a reserve for unexpected future events.

What is saving for interest?

Saving money to earn extra income through interest.

What is interest?

The money you receive for allowing someone else to use your money temporarily.

What is simple interest?

Interest calculated only on the original amount deposited.

What is compound interest?

Interest calculated on both the original amount and the accumulated interest from previous periods.

What is the real interest rate?

The nominal interest rate corrected for inflation.

What is borrowing?

Using other people's money to buy something, for which you pay a fee (interest).

What is an installment?

A pre-agreed period in which part of the debt and interest is repaid.

What is the cost of credit?

The total interest paid on a loan.

What is residual debt?

The remaining debt after repayments are subtracted.

What is a risk?

A chance of damage or loss.

What is consumer credit?

Credit used by consumers to buy consumer goods, often repaid in installments.

What is a personal loan?

A loan from the bank that you repay in fixed installments.

What is overdraft?

An agreement that allows your current account to be in the red.

What is instalment purchase?

Getting a product delivered immediately and paying it off in fixed amounts.

What is a mortgage?

A loan with a property as collateral.

Who is the insured?

The customer of the insurance company who wants to be insured.

Who is the insurer?

The insurance company that takes over the financial consequences of the risk from the insured.

What is the premium?

The amount you pay to be insured.

What is the claim payment?

The amount of money you receive from the insurer after a claim.

What is risk aversion?

Avoiding risk by insuring yourself.

What is policy fee?

A one-time fee paid when taking out insurance, outlining the agreements made with the insurer.

What is insurance tax?

Tax (21%) paid on the premium and policy costs of insurance.

What is the risk?

Probability of occurrence multiplied by the average damage of occurrence.

What is solidarity?

The idea that low-risk people have to pay for higher-risk people.

What is compulsory solidarity?

Health insurance and third-party motor vehicle insurance required by the government.

What is moral misconduct?

When people who take out insurance tend to take more risk.

What is premium differentiation?

A high-risk group pays more premium than a low-risk group.

What is an excess?

You have to pay part of the damage yourself.

What is the public sector?

The government and independent administrative organizations (ZBO).

What is ZBO (zelfstandige bestuursorganen)?

The Public Sector consists of the government and…

What is the private sector?

Citizens and businesses acting in their own interests.

What are public goods?

Goods and services which matter to everyone, like dykes and bike lanes.

What are quasi-public goods?

Goods produced by the government but have an individual price and you can be excluded if you don't pay.

What are Negative External Effects?

Traffic jams, noise pollution, and parking problems caused by interactions in an amusement park

What are Positive External Effects?

When people apart from the transaction benefit from the transaction.

What are Negative External Effects interventions?

Driving up prices of goods by additional taxes, like excise or environmental taxes.

What are Positive External Effects Stimulations?

Value of the disadvantage is then added in the price of the good.

What are Merit Goods?

The government stimulates consumption of goods with positive external effects.

What is the National Budget?

Shows the expected income of the central government in a year against the expected expenditure.

What are taxes?

Payment required by law to be paid by citizens and businesses.

What are direct taxes?

Paying a part of your income, profits and assets directly to the government.

What are indirect taxes?

Added tax on almost every good and service (VAT or excise duty).

What are Cost-Increasing Tax?

Goods and services become more expensive as a result.

What is social security?

Money from paying social security contributions.

What is social security?

People with no income still have enough money to live.

What is revenue side?

Government can increase taxes, increasing tax revenue.

What is expenditure side?

Government can spend less by cutting spending, decreasing expenditure.

What's the EMU Budget Deficit Agreement?

Budget Deficit should not exceed 3% of GDP.

What's the EMU Public Debt Agreement?

Public Debt should not exceed 60% of GDP

What is GDP (Gross Domestic Product)?

Total output of a country added together.

What is an index?

An index shows a percentage change compared to an agreed period called the base year.

What is the index formula?

Index = Number in Requested Year : Number Base Year * 100.

What is importing?

Buying products and services from abroad.

What is exporting?

Selling products and services to foreign countries.

What does it mean for increased production at home?

Increased production at home, exporting benefits.

What is Competitiveness?

Extended to which companies are able to compete with foreign countries.

What is Labour productivity?

Output per employee per period.

What are Exporting Disadvantages?

To export, you have to produce more than you need as a country.

What is Specialisation?

Countries often specialise in producing certain goods.

What are Importing Disadvantages?

Not making products yourself leads to dependency on other countries.

What are Paying in other countries?

Exchange usually costs money.

What is Exchange rate?

Price of one currency expressed into another.

What is Direct quotation?

Expresses your currency into a foreign currency.

What is Indirect quotation?

Expresses foreign currency into your own.

Why do we need protection measures?

To protect own businesses and jobs.

Why do we need protection measures (start-up)?

To protect a start-up industry.

What are Protective measures?

Government can protect its own production by protective measures.

How do you boost exports?

Giving export subsidies, giving tax breaks to exporting companies.

What do export goods often entail?

Giving export subsidies.

How do you limit imports?

Making products from abroad more expensive, import quotas, import bans.

What is Free trade area?

Countries can import and export without importing or exporting duties.

What is Trade war?

Countries do not cooperate but clash with each other over, for example, import and export duties.

What is a life course and how does it affect financial decisions?

The sequence of life stages (childhood, adolescence, adulthood, retirement) each influencing financial decisions with unique goals and challenges.

What is saving, and how does it differ from saving for a purpose?

Postponing consumption by allocating money to savings accounts or other means, differing from 'saving for a purpose' by lacking a specific goal.

What does it mean to save for a purpose?

Setting aside funds to purchase a specific, unaffordable item, like a car or vacation, requiring a concrete savings plan.

What is precautionary savings, and why is it important?

Building a financial safety net for unexpected events (job loss, medical emergencies), serving as a financial cushion during crises.

Why do people save for interest and what does this entail?

Saving money in interest-bearing accounts to generate passive income, increasing the initial savings amount over time.

What is interest, and how is it beneficial?

The compensation received for allowing someone else to use your money, expressed as a percentage of the principal amount.

Explain simple interest.

Interest calculated solely on the initial deposit, not considering accumulated interest from previous periods.

Explain compound interest and how it differs from simple interest.

Interest calculated on the initial deposit and the accumulated interest, leading to exponential growth over time.

What is the real interest rate, and why is it important to consider inflation?

The nominal interest rate adjusted for inflation, reflecting the true return on investment in terms of purchasing power.

What does borrowing entail, and what are the obligations?

Accessing funds from others to finance purchases, requiring repayment of the principal plus interest over a specified period.

What is an installment in the context of borrowing?

A scheduled period with fixed payments toward repaying a debt, covering both principal and interest charges.

What is the cost of credit, and how is it calculated?

The total amount of interest paid over the life of a loan, representing the cost of accessing credit.

What is residual debt, and how does it change over time?

The outstanding debt remaining after subtracting cumulative repayments from the original loan amount.

What is risk, and what are some examples of financial risks?

The chance of potential harm or loss, potentially impacting financial stability.

What is consumer credit, and what are common forms of it?

Credit products used by consumers for purchasing goods, often repaid in installments with associated interest charges.

What is a personal loan, and how does it work?

A loan obtained from a bank with fixed repayment installments, suitable for financing various personal expenses.

What is an overdraft, and what are its implications?

An agreement allowing a current account to have a negative balance, requiring repayment of the overdrawn amount plus interest.

What is an installment purchase, and how does it differ from a regular purchase?

Receiving a product immediately and paying for it in fixed installments, typically involving interest charges.

What is a mortgage, and how does it work?

A loan secured by a property, used to finance real estate purchases, with the property serving as collateral.

Who is the insured in an insurance agreement?

The individual or entity seeking insurance coverage to mitigate potential financial risks.

Who is the insurer in an insurance policy?

The insurance provider that assumes the financial consequences of specified risks in exchange for premiums.

What is the premium in insurance, and how is it determined?

The periodic payment made to the insurer for maintaining insurance coverage, determined by risk assessment.

What is the claim payment, and under what circumstances is it provided?

The compensation received from the insurer following an approved claim, covering losses as specified in the policy.

What is risk aversion, and how does insurance address it?

Avoiding risk by purchasing insurance coverage, transferring the financial burden of potential losses to the insurer.