Financial Literacy Final Review

American Government (Financial Literacy) Final Review

Economics

• Needs: goods or services required for survival; the requirements for maintaining life

• Wants: our vast desire for goods and services that increase our quality of life but are not absolutely necessary

• Scarcity: Limited resources to satisfy unlimited wants.

• Factors of Production:

  • Land: Natural resources (dirt).

  • Labor: Workforce.

  • Capital: Anything of value, including money ().

  • Entrepreneurship: Ability to manage land, labor, and capital.

• Substitute Good: Butter or margarine (goods that can be used in place of one another).

• Federal Reserve: "Bankers Bank"

  • Expand money supply by reducing the reserve requirement.

• GDP: Gross Domestic Product, the total value of goods and services within the U.S.

• Corporation: a company or group of people authorized to act as a single entity

• Sole Proprietorship: a single individual owns and operates the business

• Fiscal Policy: involves government actions, primarily through spending and taxation, to influence the economy

• Monetary Policy: the actions a central bank takes to influence the money supply and credit conditions in an economy, with the goal of achieving economic stability

• Deficit Spending: When the government spends more than it takes in.

• Economic Questions: Who produces what, how, where, and at what cost?

• Command Economy: Government directs ALL economic questions.

• Traditional Economy: Cultural tradition directs ALL economic questions.

• Market Economy: Supply & Demand (consumer and producer) directs ALL economic questions.

• Laissez-faire Economy: Little government interference (hands off).

• Sanctions: Economic tool when dealing with foreign nations.

• Opportunity Cost: What you give up to do/get something else.

• Consumer Price Index: Measure of the economy, tracking common household items (e.g., milk, bread, butter).

Business Cycle

1. Depression

2. Inflation

3. Recession

4. Recovery

Paycheck/Banking Concepts

• Financial Literacy

• 3 Rules for Saving:

  1. Start Early

  2. Diversify

  3. Hold

• Gross Pay: The total amount earned by an employee before deductions such as taxes, insurance, and retirement contributions.

• Net Pay: The amount of money an employee takes home after deductions such as taxes, retirement contributions, and other withholdings have been subtracted from their gross pay.

• Fixed Deductions: A set dollar amount subtracted from an employee's gross pay, such as a fixed premium for health insurance.

• Variable Deductions: the amount of the deduction may vary each year based on changes in those specific expenses, such as medical expenses

• Disposable Income: What you have left over after you have paid everything.

• Pay Yourself First.

• Bounced Check: often called a “rubber check” it is when a check is returned to the original bank because there are not enough funds to cover the check in the amount (sometimes a fee is charged)

• Tax Forms: 1040, 1040EZ, 1099, W-2, W-4

• April 15th = Tax Day = IRS Audit?

• Bankruptcy = 7 years Rule

• FDIC coverage = $250,000

Investing

• Risk, Rate of Return, Liquidity: What you think about when you're investing.

• 401k, 403B, Roth IRA, Mutual Funds: Long-term savings plans.

• CDs & Bonds

• Individual Investment Philosophy: Changes over time.

Credit/Loans

• Credit Card Act 2010: Prevents individuals under 21 from opening a credit card without a cosigner.

• APR: 18-22% (common APR)

• Credit Bureaus: Experian, Equifax, and TransUnion

• Credit Card Liability: (50$$)

• Debit cards vs. Credit cards: (+/-) advantages and disadvantages

• Consumer protection: BBB vs. caveat emptor vs. lemon law

• Build Credit/Good Credit, bad credit

• Credit cards: Visa, Mastercard, American Express (flexibility and roll over amounts)

• FAFSA: Free to fill out and to get student aid for college.

Insurance

• Liability: Loss from lawsuits.

• Collision: Auto protection when you hit another car.

• Comprehensive Coverage: Auto protection for something other than a collision such as hitting a deer, theft, etc.

• Life: provide financial protection for your family after you pass away.

• House/Rent: Lease, security deposit needed in case of damages.

• Addendums vs. Coverage Provisions vs. Policy Riders vs. Premiums

• Health insurance

Definitions

1. Installment: When a debt is divided into several payments.

2. Deduction: Taking a part out of a payment or an account to pay something else.

3. Indicators: A notable or significant fact that can lead you to analyze something else.

4. Liability: Something owed or an obligation.

5. Disposable Income: A part of a person's income remaining after deducting (or taking out) income taxes.

6. Casualty: A thing or group that suffers loss as a result of an event.

7. Collision: A clash or conflict involving objects such as cars.

8. Term Life: A type of life insurance that provides a payment upon death for a specific period of time.

9. Comprehensive Coverage: Insurance designed to pay for the repair or replacement of the policy owner's car in the event of damage not resulting from an accident.

10. Policy Holder: The owner of an insurance policy.

11. Bounced Check: often called a “rubber check” it is when a check is returned to the original bank because there are not enough funds to cover the check in the amount (sometimes a fee is charged)

12. Allowances: a fixed payment made on a specific date or time period

13. Liquidate: to sell everything a company owns in order to pay outstanding debt

14. Inflation: to sell everything a company owns in order to pay outstanding debts

15. Stagflation: when a situation in a country occurs when you have both high inflation and high unemployment

16. Transition: an economic theory that links population changes to changes in areas such as health care and education

17. Addendums: a document added to an original document to clarify a point

18. Coverage Provisions: an insurance that protects a certain thing for a specific value and time

19. Policy Riders: an addition added to an original policy that clears up or adds more protection

20. Premiums: a fee charged for advancing a loan

21. Mutual Fund: an investment firm that manages finances ans ells shares (parts of businesses) to the public

22. Compound Interest: interest computed on the original amount and then added and computed again over time

23. Home Equity Loan: a second mortgage loan that is secured by the value in your home

24. 401 K: A type of an employer sponsored benefit for retirement

25. Audit: an in-dept examination of a person’s or company’s accounts

26. Balance Sheet: a summary of the finances of a person’s or company’s during a specific period of time

27. Inventory: the value of materials and goods owned by a firm

28. Probe: an investigation of an event involving a person or company

29. Mortgage: a financial institution loans you an amount of buy something — usually refers to a home or other property or large item (ex: boat)

30. Caveat Emptor: meaning “buyer beware” — the consumer is responsible to make sure you are making a wise purchase and you are responsible for the consequences of a poor purchase

31. Lemon Laws: a statute that protects consumers from defective products

32. Debit Card: a bank card that is used in transactions but is NOT a credit card (deductions made from a bank account)

33. Certificate of Deposit: a receipt given to an individual who opens an account at an financial institution or invests some sorts of money