Labor, Credit, and Banking Flashcards

Derived demand

The demand for an item comes solely from the demand for another good or service

What are changes in demand for labor?

1. Productivity - changes in technology

• education

• training

• experience

2. restrictions into entry of labor market

• licensing requirements

• degree requirements

3. The demand for output changes

Wage

Hourly rate of pay

Salary

Pay based on calendar

Commission

Pay based on sales

Stipend

Pay for specific services

Supply of labor

Number of people willing and able to work

Changes in supply of labor

Increases:

• Better working conditions

• More opportunity for advancement

• Enhanced compensation

Decreases:

• Dangerous or unpleasant working conditions

• Artificial restrictions (licensure, school requirements, etc.)

• long training programs

• discrimination

Money

Anything used to facilitate exchange in the marketplace

Money supply

Amount of money in an economy that is available to spend

Commerical bank

Business-based bank. It has credit lines, loans, savings, cash flow analysis, and provides services to customers

Local Consumer Bank

Focuses on customers and their needs. Has loans, draft deposits, deposit boxes, mortgage, credit cards, etc.

FDIC (Federal Deposit Insurance Corporation)

Insures each deposit up to $250,000, put in place during the New Deal

Federal Reserve System

1. Board of Governors that supervises the FRS

2. Federal Open Market Committee - supervises buying and selling of US government securities

3. 12 Federal Reserve Banks

4. Federal Advisory Council - advises the president

5. Member banks - all national banks and some state banks

Collateral

Security that a loan will be repaid

Signature loan

Small prepaid amount to ensure collateral for a loan

Secured loan

Uses personal or titled property as security for the loan

Mortgage

Secured through deeded property

Capital

Ability to make some sort of down payment on loan

Garnishment

Court ordered deductions from paycheck as payment for debt.

Repossession

Forfeiture of property used as security for a loan

Eviction

Forcible removal from rental property

Foreclosure

Forcible removal from property due to non-payment of a mortgage

Usury

Making loan at an illegally high interest rate

Promissory note

Written document promising the person will pay back the lender of a loan

Debt ratio

Total credit obligations divided by net income

Prime rate

Interest rate that banks use as basis to set interest rates for different types of loans

Reserve requirements

How much money is required to be kept in a vault or deposit with the FED

Discount rate

The minimum rate of return necessary to invest in a particular project or investment opportunity

Open Market operations

Government bonds and other government securities

Credit bureaus

Companies that compile and sell credit reports

Titled property

Property that is license or registered with the government

Deeded property

Where ownership of property has to be transferred through a deed