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GROSS - Economics > Chapter 4: The Consumers in our Economy > Flashcards

Chapter 4: The Consumers in our Economy Flashcards

1
Q

How should money be spent?

A
  • trade off

- opportunity cost

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2
Q

What are the two sources of income?

A
  • ownership of wealth

- income from work

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3
Q

What are four examples of ownership of wealth?

A
  • intrest
  • dividends
  • rent
  • capital gains
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4
Q

What are the two types of capital gains and explain them?

A
  • long term: hold for more than a year and pay higher taxes

- short term: hold for less than a year and pay lower taxes

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5
Q

What is OWNERSHIP OF WEALTH?

A

assets - liabilities = net worth

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6
Q

What is INTEREST?

A

payment for using someone else’s money (capital)

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7
Q

What are DIVIDENDS?

A

payments made from the earnings of a corporation to its stockholders

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8
Q

What is RENT?

A

returned paid to those who supply the factors of production known as land

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9
Q

What are CAPITAL GAINS?

A

The return generated by the sale of and investment

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10
Q

What does the value of the things we own depend on?

A
  • size of our income

- how wisely we spend our money

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11
Q

What is DISPOSABLE INCOME?

A

money that is left over after taxes (net pay)

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12
Q

What is DISCRETIONARY INCOME?

A

money we can spend as me please after bills

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13
Q

What is BUDGET?

A

A financial plan that summarizes income and expenditures over a period of time

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14
Q

What three things can a budget end up in…?

A
  • deficit
  • balance
  • surplus
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15
Q

What is DEFICIT?

A

expenditures are greater than income

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16
Q

What is BALANCE?

A

income and expenditures are the same

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17
Q

What is SURPLUS?

A

expenditures are less than income

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18
Q

What is the proper order of a budget?

A

1) estimate income
2) set financial goals
3) plan expenditures

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19
Q

What is the importance of savings?

A

it protects against the loss of a job illness and the uncertainty of old age

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20
Q

What are the three considerations with investment?

A
  • safety
  • rate of return
  • liquidity
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21
Q

What are two types of rates of return?

A
  • compound interest

- annual interest

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22
Q

What is SAFTEY?

A

protection of your principle (no money lost)

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23
Q

What is RATE OF RETURN?

A

The amount of interest stated as a percent of the principle value of the investment

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24
Q

What is COMPOUND INTEREST?

A

interest that is computed and the amount of deposit and the amount that was previously paid (interest on principal + interest)

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25
Q

What is LIQUIDITY?

A

A measure of the ease with which you can convert your assets to cash

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26
Q

Where are the seven places people put their money?

A
  • Passbook savings account
  • A negotiable order of withdrawal (now)
  • A money market account
  • A certificate of deposit (cd)
  • A credit union account
  • A US savings bond
  • A money market fund
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27
Q

What are the pros of a passbook savings account?

A
  • safety of principal

- Liquidy

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28
Q

What is the con of a passbook savings account?

A

Low rate of return

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29
Q

What is a NEGOTIABLE ORDER OF WITHDRAW (NOW)?

A

interest bearing account on which the depositor can write checks

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30
Q

What is A MONEY MARKET ACCOUNT?

A

referred to the market for short term credit instruments

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31
Q

What is the difference between a treasury bill and a treasury bond?

A

Treasury Bill: loan to the government payable in less than one year

Treasury Bond: loan to the government payable in more than one year

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32
Q

What is a CERTIFICATE OF DEPOSIT (CD)?

A
  • pays the highest rate of return offered by savings institution
  • money must be left on deposit for specific period of time
  • early withdrawal results from forfeiting all interest
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33
Q

What is A CREDIT UNION ACCOUNT?

A
  • used by an association of people with something in common (ie teachers, unions, etc.)
  • it pays a higher rate of return to depositors
  • it charges less to borrow
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34
Q

What is a US SAVINGS BOND?

A
  • a loan made to the US government
  • it pays no yearly interest
  • interest is added to the value of the bond until it matures
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35
Q

What is a MONEY MARKET FUND?

A

A mutual fund that uses the resources of their investors to buy money market certificates

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36
Q

What is a pro of a money market fund?

A

pay a higher rate of return

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37
Q

What is a con of a money market fund?

A

they are not insured by the Government

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38
Q

What is a CHECKING ACCOUNT?

A

A bank account against which the depositor can draw checks

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39
Q

What is a CHECK?

A

A written order directing a bank to pay a person a specific sum of money

40
Q

What are two ways to endorse a check?

A
  • blank endorsement

- restrictive endorsement

41
Q

What is BLANK ENDORSEMENT?

A

transferred by simply signing your name on the back of checks

42
Q

What is RESTRICTIVE ENDORSEMENT?

A

transferred by naming individuals entitled to receive the amount indicated on the check

43
Q

What is CONSUMER CREDIT?

A

where customer is provided with cashing goods or services now with understanding that whatever is received will be paid for in the future

44
Q

What is FINANCE CHARGE?

A

The total amount you pay to use credit

45
Q

What is ANNUAL PERCENTAGE RATE (APR)?

A

percentage cost of credit calculated on an annual basis

46
Q

What does insurance do?

A

it enables people to share risk

47
Q

What is UNDERWRITING?

A

insurance companies calculate the odds of a particular event occurring than compute how much will need to be paid in light of that event

48
Q

How are the number of people insured calculated?

A
  • price of administration
  • product quality
  • expenses
  • price of underwriting
  • how much profit is wanted
49
Q

What is PREMIUM?

A

how much you pay for insurance

50
Q

What are the four types of insurance?

A
  • life insurance
  • health insurance
  • property insurance
  • liability insurance
51
Q

What is LIFE INSURANCE?

A

it’s purpose is to provide money for a family went a wage earner dies

52
Q

What is TERM INSURANCE?

A
  • provides coverage of a specific period of time (1 yr, 5yr, or 10yr)
  • least costly
  • insurance ends with term
  • can be renewed at a higher rate
53
Q

What is WHOLE-LIFE INSURANCE?

A

Pay the same premium throughout your entire life

54
Q

What is another name for whole-life insurance?

A

level premium

55
Q

What is another name for level premium?

A

whole-life insurance

56
Q

What are two advantages to having whole-life insurance?

A

it is both insurance and a savings account

57
Q

What is an ENDOWMENT?

A
  • protects for a specific number of years
  • at the end of the years the full amount is paid to the policy holder
  • if the policyholder dies before maturity date the money is paid to the beneficiary
58
Q

What is HEALTH INSURANCE?

A

it’s purpose is to provide protection from the financial problems arising out of an accident or illness

59
Q

What are the three types of medical insurance?

A
  • basic coverage
  • major medical
  • catastrophic
60
Q

What is BASIC COVERAGE INSURANCE?

A

pays all are part of the physician fees, hospital services, and surgical procedures

61
Q

What is MAJOR MEDICAL?

A

protects against the expenses of additional care

62
Q

What is CATASTROPHIC INSURANCE?

A

protects against the most serious kind of illnesses and accidents (long-term)

63
Q

What is DISABILITY INCOME INSURANCE?

A

it is designed to provide cash payments well the wage earner is recovering

64
Q

What are two advantages to group insurance is as opposed to individual?

A
  • group is cheeper

- with a group you do not need a medical exam to qualify for the insurance

65
Q

What is the HEALTH, MAINTENANCE , AND ORGANIZATIONAL INSURANCE?

A
  • in exchange for a flat fee group members are entitled to unlimited visits to physicians and specialists
  • typically charges a small fee (co-pay)
  • stresses the importance of preventive healthcare
66
Q

What are the three types of property insurance?

A
  • home
  • auto
  • renters
67
Q

What is LIABILITY INSURANCE?

A

protects us against the cost of injuries to others or damage to their property for which we are responsible

68
Q

What does it mean when a liability case is taken on CONTINGENCY?

A

you can lose nothing if the case is lost but you split with the lawyers if the case is won

69
Q

What are the three benefits of advertising?

A
  • provide information on prices services in recent improvements
  • could result in lower prices if massmarketing occurs
  • stimulate competition
70
Q

What are the two negatives of advertising?

A
  • could be misleading

- higher prices

71
Q

What is PUFFERY?

A

the use of slogans that sound great but mean little or nothing

72
Q

What are the three advertising strategies?

A
  • puffery
  • rational appeal
  • emotional appeal
73
Q

What is RATIONAL APPEAL?

A

it relies upon logic to convince the consumers to buy products

74
Q

What is EMOTIONAL APPEAL?

A

reliance on the use of psychology to get the advertisers message across

75
Q

What are the three types of emotional appeal?

A
  • testimonial
  • bandwagon
  • popularity
76
Q

What is TESTIMONIAL APPEAL?

A

A famous person claims to use and enjoy a particular product

77
Q

What is BANDWAGON APPEAL?

A

it suggest that everyone is using that particular product

78
Q

What is POPULARITY APPEAL?

A

it suggests that by simply using a particular product you will become popular

79
Q

What are the six agencies that work to help consumers?

A
  • Office of consumer affairs (OCA)
  • The consumer product safety commission (CPSC)
  • The federal trade commission (FTC)
  • The food and drug administration (FDA)
  • The department of agriculture (USDA)
  • The United States Postal Service
80
Q

What is THE OFFICE OF CONSUMER AFFAIRS (OCA)?

A

works with the consumers in the business community who have marketplace problem

81
Q

What is THE CONSUMER PRODUCT SAFTY COMMISSION (CPSC)?

A

protects the public against injury from consumer products

82
Q

What is the FEDERAL TRADE COMMISSION (FTC)?

A
  • enforces government antitrust legislation
  • prevents the discrimination of false advertising
  • enforces government consumer credit laws
83
Q

What is the FOOD AND DRUG ADMINISTRATION (FDA)?

A

protects against unsafe food, drugs, and cosmetics

84
Q

What is THE DEPARTMENT OF AGRICULTURE (USDA)?

A
  • inspects and grades food products

- publishes information on how to get more for your food dollar

85
Q

What is the POSTAL SERVICE?

A

protects against the misuse of mail by preventing fraudulent schemes

86
Q

What is BUSINESS SELF REGULATION?

A

Business owners recognize that satisfied customers are the key to financial success

87
Q

What are two agencies set up by businesses to help businesses?

A
  • chamber of commers

- the better business burrow (bbb)

88
Q

What is THE CHAMBER OF COMMERS?

A

an association of business people who promote interest of their community

89
Q

What is THE BETTER BUSINESS BURROW (BBB)?

A

International organization that sets standards of business ethics

90
Q

What are BUSINESS ETHICS?

A

concern for keeping fair business practice

91
Q

What is GROSS NATIONAL PRODUCT?

A

The final market price of all goods and services produced

92
Q

What does c + i + g equal and mean/ stand for?

A

it’s equals gross national product (gnp)

c- consumer spending
i- investment or business spending
g- government spending

93
Q

What is CONSUMPTION?

A

The process of buying goods and services

94
Q

What is ENGELS LAW?

A

as a family’s income increases the percent spent on a necessities decreases while the percent spent on luxuries increases

95
Q

What is THE RULE OF 7/2?

A

money will double every 7 years

GROSS - Economics (7 decks)

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