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CFP 1 - General Planning > 101-9 Economic Env & Consumer Protection Laws > Flashcards

101-9 Economic Env & Consumer Protection Laws Flashcards

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CFP® flashcards
1
Q

Inelastic demand

A

A good is inelastic when quantity demanded responds little to price changes (food)

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2
Q

Elastic demand

A

A good is elastic when quantity demanded responds greatly to price changes (luxury)

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3
Q

Recession

A

Decline in real GDP for two or more successive quarters

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4
Q

Depression

A

Persistent recession and a severe decline in economic activity

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5
Q

Economics

A

The study of production, distribution, and consumption, or the study of choices in the presence of scarce resources

2 areas:
Microeconomics
Macroeconomics

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6
Q

Microeconomics

A

The study of how individuals and companies make decisions to allocate scarce resources

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7
Q

Macroeconomics

A

The study of an economy as a whole

Examines factors that affect a country’s economic growth

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8
Q

3 key macroeconomic targets

A
  • output or GDP
  • price stability
  • employment
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9
Q

Supply

A

The amount of a good or service available for purchase by suppliers at a given price

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10
Q

Demand

A

The quantity of goods and services consumers want to purchase at a given price

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11
Q

Substitution effect

A

When the price of a good rises, consumers substitute other similar lower-priced goods

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12
Q

Income effect

A

When the price of a good rises, consumers will discontinue or significantly reduce their use

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13
Q

Price elasticity

A

The responsiveness of the quantity of a good demanded to changes in the good’s price, all other economic forces remaining constant

Inelastic: food and gasoline
Elastic: new boat

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14
Q

Gross domestic product (GDP)

A

The total monetary value of all goods and services produced within the domestic US over the course of a given year, including income generated by a foreign firm

Constant dollars —> real gdp

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15
Q

Gross national product (GNP)

A

The total market value of all goods and services produced by US residents’ labor and property

GNP measures production based on ownership

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16
Q

3 major fed tools of monetary policy

A
  • lowering or increasing the amount of required reserves that must be held by banking members of the Fed
  • raising or lowering the fed’s discount rate
  • engaging in open-market operations, which is the buying or selling of government securities in the open marketplace by the Fed
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17
Q

Discount rate

A

The rate at which banks can borrow from any of the Federal Reserve Banks

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18
Q

Federal funds rate

A

The interest rate charged on short-term borrowing (often overnight to fulfill reserve requirements) between banks

19
Q

Prime rate

A

The rate of interest charged by commercial banks to its best business and personal customers

20
Q

Recession

A

Occurs when the GDP has experienced a decrease in real terms for 2 consecutive quarters or a minimum of six months from a baseline of zero

21
Q

Depression

A

When the GDP has experienced a decrease in real terms for six consecutive quarters of a minimum of 18 months from a baseline of zero

22
Q

Leading indicators

A 
Housing starts
New claims for unemployment
Bond yields
Orders for durable goods
Changes in investor sentiment
23
Q

Coincident indicators

A

Industrial production
Level of personal income
Amount of corporate profits

24
Q

Lagging or confirming indicators

A

Prime interest rate
Changes in CPI, particularly for services
Amount of business and consumer loans outstanding
Avg duration of unemployment

25
Q

Inflation

A

Increase in the general level of prices

26
Q

Rate of inflation

A

Rate of change in the general price level

27
Q

Disinflation

A

Decline in the rate of inflation

28
Q

Deflation

A

A decline in the general price level and is often caused by a reduction in the money supply and consumer demand

29
Q

Stagflation

A

Occurs when inflation and unemployment rise and the general growth of the economy is slow as business output falls

30
Q

Chapter 13 bankruptcy

A

Involves the adjustment of debts of an individual with regular income
The debtor is not generally required to relinquish any assets in payment of creditors

31
Q

Chapter 7 bankruptcy

A

Historically most popular type of bankruptcy because an individual’s personal unsecured debts are generally cancelled

32
Q

3 Debts and obligations that are generally not dischargeable

A
  • student and government loans
  • child support and alimony obligations
  • recent federal income taxes due
33
Q

Chapter 11 bankruptcy

A

Debtor remains in possession and may continue to operate the debtor’s business

34
Q

Consumer Credit Protection Act

A

Aka truth in lending act

Requires lenders, before extending credit, to disclose both the dollar amount of finance charges and the annual percentage rate (APR), as well as other loan terms and conditions

35
Q

Fair Credit Billing Act

A

Requires consumers to notify the creditor in writing of any billing errors within 60 days of the date they receive the billing statement

36
Q

Consumer Credit Reporting Reform Act

A

Requires credit bureau reports to include accurate, relevant, and recent information about the financial situation of credit applicants

37
Q

Equal Credit Opportunity Act

A

Prohibits credit discrimination on the basis of race, color, religion, national origin, gender, marital status, or age

38
Q

Fair Debt Collection Practices Act

A

Prohibits debt collectors from engaging in certain practices such as contacting a debtor at his place of employment if the employer objects, harassing or intimidating the debtor, or using false or misleading practices

39
Q

Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act)

A

Enacted to establish fair practices and to enable consumers to better understand their credit transactions

40
Q

Privacy Act of 1974

A

Establishes a code of fair information practices that regulates the types of personal information the federal government can collect and how this information can be used

41
Q

Fair and Accurate Credit Transaction Act of 2003

A

Consumers can obtain a free credit report every 12 months from each of the three national credit reporting agencies, Equifax, TransUnion, and Experian

Any theft should be reported to the FTC

42
Q

Skimming

A

When credit card information is stolen by using a special storage device when processing the card

43
Q

Phishing

A

Posing as a financial institution or company and sending spam over the internet to entice an individual to provide personal information

CFP 1 - General Planning (10 decks)

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