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Economics > Midterm Review > Flashcards

Midterm Review Flashcards

1
Q

Credit

A

When goods, services, or money is received in exchange for a promise to pay a definite sum of money at a future date.

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2
Q

Borrower

A

The person or organization that is receiving the money from the ladder

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3
Q

Annual Percentage Rate (APR)

A

The cost of credit expressed as a yearly interest rate

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4
Q

Interest

A

When referring to credit, interest is the charge for borrowing money.

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5
Q

Lender

A

The person or organization who has the resources to provide the individual with a loan

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6
Q

Opportunity Cost

A

What you don’t allow yourself to spend when you start saving up for money

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7
Q

Introductory Rate

A

The APR charged during the credit card’s introductory period after a credit card account is opened. The card will have a different APR after the introductory period ends

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8
Q

Variable Rate APR

A

An APR that may change depending on other factors, such as the prime rate

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9
Q

Prime Rate

A

an index that represents the interest rate most banks charge their most creditworthy customers

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10
Q

Balance Transfer

A

the act of transferring debt from one credit card account to another

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11
Q

Cash advance

A

Discloses the interest paid for cash advances, such as withdrawing cash from an ATM using a credit card. Cash advance fees may also apply

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12
Q

Annual fee

A

a yearly fee that may be charged for having a credit card

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13
Q

Late payment fee

A

charged when a cardholder does not make the minimum monthly payment by the due date

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14
Q

Overdraft

A

a deficit in a bank account caused by drawing more money than the account holds.

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15
Q

FICA (federal insurance contributions act)

A

a U.S. payroll tax used to fund Social Security and Medicare

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16
Q

Net pay

A

the amount people receive after taxes and other deductions are taken out of gross pay

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17
Q

Gross pay

A

the amount people earn per pay period before any deductions or taxes are paid.

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18
Q

1040

A

one of three IRS tax forms used for personal federal income tax returns filed with the IRS

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19
Q

W2

A

This form is a summary of a person’s earning and tax withholding for an entire year.

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20
Q

W4

A

allows employers to determine what amount of income tax they should (deduct) from each employee’s paycheck based on that person’s situation

21
Q

Explain the Rule of 72

A

By dividing 72 by the annual rate of return, you can see how many years it will take for the initial investment to double

22
Q

How does Compound Interest work?

A

you get compounded interest and make a lot of money overtime.

23
Q

What does it mean to diversify?

A

Diversifying your areas of investments; reduces the risk of losing your money

24
Q

What is on your credit report?

A

Type of account, the date you opened it, credit limit, the account balance, payment history.

25
Q

How is your credit score determined?

A

Types of credit in use, requests for new credit, length of credit history, payment history, current total debt

26
Q

What factors affect the growth of savings? (Need all 3)

A

Time, Investment Size, Rate of Return

27
Q

What is a minimum payment? How do credit card companies make money off this?

A

You are required to make at least a minimum payment each month. You usually pay substantially more than what was initially charged on the card.

28
Q

What is the Federal Reserve?

A

Banking system of America

29
Q

What are interest rates?

A

Rate in which a bank is charging interest when you borrow money for an extended period of time

30
Q

Where is the routing number located on a check?

A

Bottom, left of the account number.

31
Q

What is the difference between common and preferred stock?

A

Preferred stockholders receive a fixed dividend from the company, while common shareholders may or may not receive one

32
Q

How does a corporation raise funds?

A

By making their corporation more attractive for potential investors (liability being limited, how easily a stock can be sold)

33
Q

How do shareholders receive money from a company?

A

When its stock is issued

34
Q

How does a company get money from shareholders?

A

Shareholders get money by a corporation earning profits, which increases stock value, or through dividends that are distributed to stockholders by a business when it earns profits.

35
Q

What does IPO stand for?

A

Initial public offering

36
Q

What does it mean when a company goes public?

A

Going public refers to a private company’s initial public offering (IPO), thus becoming a publicly traded and owned entity. Businesses usually go public to raise capital in hopes of expanding

37
Q

What are dividends?

A

A portion of the company’s profits paid to its shareholders

38
Q

How does risk affect the rate of return on your investment?

A

The higher the risk, the more you’re able to gain (or lose).

39
Q

What are the two major stock exchanges in the United States?

A

New York Stock Exchange, NASDAQ

40
Q

What is a tombstone ad?

A

Found on the wall street journal

41
Q

What is the difference between a public and private corporation?

A

The public company refers to a company that is listed on a recognized stock exchange and traded publicly

42
Q

What is a stock split?

A

An issue of new shares in a company to existing shareholders in proportion to their current holdings.

43
Q

What does a stock symbolize?

A

That the price movement of a stock indicates what investors feel a company is worth

44
Q

What are capital gains?

A

a profit from the sale of property or an investment.

45
Q

What are capital losses?

A

the difference between a lower selling price and a higher purchase price, resulting in a financial loss for the seller

46
Q

What are fixed expenses? Give 3 examples.

A

Mortgage, phone bill, rent

47
Q

What is a variable expense? Give 2 examples.

A

Utilities, credit card fees

48
Q

What is the difference between “pay as you go” and forced savings?

A

Taxes are collected on a “(pay as you go) ” principle, which means that as people earn income, they pay taxes rather than waiting until the end of the year to pay all taxes which would’ve been considered forced savings since you would’ve have to been forced to wait at the end of the year to pay all taxes.

Economics (7 decks)

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