101-9 Economic Env & Consumer Protection Laws Flashcards
Inelastic demand
A good is inelastic when quantity demanded responds little to price changes (food)
Elastic demand
A good is elastic when quantity demanded responds greatly to price changes (luxury)
Recession
Decline in real GDP for two or more successive quarters
Depression
Persistent recession and a severe decline in economic activity
Economics
The study of production, distribution, and consumption, or the study of choices in the presence of scarce resources
2 areas:
Microeconomics
Macroeconomics
Microeconomics
The study of how individuals and companies make decisions to allocate scarce resources
Macroeconomics
The study of an economy as a whole
Examines factors that affect a country’s economic growth
3 key macroeconomic targets
- output or GDP
- price stability
- employment
Supply
The amount of a good or service available for purchase by suppliers at a given price
Demand
The quantity of goods and services consumers want to purchase at a given price
Substitution effect
When the price of a good rises, consumers substitute other similar lower-priced goods
Income effect
When the price of a good rises, consumers will discontinue or significantly reduce their use
Price elasticity
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
Gross domestic product (GDP)
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
Gross national product (GNP)
The total market value of all goods and services produced by US residents’ labor and property
GNP measures production based on ownership
3 major fed tools of monetary policy
- 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
Discount rate
The rate at which banks can borrow from any of the Federal Reserve Banks
Federal funds rate
The interest rate charged on short-term borrowing (often overnight to fulfill reserve requirements) between banks
Prime rate
The rate of interest charged by commercial banks to its best business and personal customers
Recession
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
Depression
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
Leading indicators
Housing starts New claims for unemployment Bond yields Orders for durable goods Changes in investor sentiment
Coincident indicators
Industrial production
Level of personal income
Amount of corporate profits
Lagging or confirming indicators
Prime interest rate
Changes in CPI, particularly for services
Amount of business and consumer loans outstanding
Avg duration of unemployment
Inflation
Increase in the general level of prices
Rate of inflation
Rate of change in the general price level
Disinflation
Decline in the rate of inflation
Deflation
A decline in the general price level and is often caused by a reduction in the money supply and consumer demand
Stagflation
Occurs when inflation and unemployment rise and the general growth of the economy is slow as business output falls
Chapter 13 bankruptcy
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
Chapter 7 bankruptcy
Historically most popular type of bankruptcy because an individual’s personal unsecured debts are generally cancelled
3 Debts and obligations that are generally not dischargeable
- student and government loans
- child support and alimony obligations
- recent federal income taxes due
Chapter 11 bankruptcy
Debtor remains in possession and may continue to operate the debtor’s business
Consumer Credit Protection Act
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
Fair Credit Billing Act
Requires consumers to notify the creditor in writing of any billing errors within 60 days of the date they receive the billing statement
Consumer Credit Reporting Reform Act
Requires credit bureau reports to include accurate, relevant, and recent information about the financial situation of credit applicants
Equal Credit Opportunity Act
Prohibits credit discrimination on the basis of race, color, religion, national origin, gender, marital status, or age
Fair Debt Collection Practices Act
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
Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act)
Enacted to establish fair practices and to enable consumers to better understand their credit transactions
Privacy Act of 1974
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
Fair and Accurate Credit Transaction Act of 2003
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
Skimming
When credit card information is stolen by using a special storage device when processing the card
Phishing
Posing as a financial institution or company and sending spam over the internet to entice an individual to provide personal information
