Vocab F-L Flashcards
Federal funds rate
The interest rate at which depository institutions lend balances (federal funds) at the Federal Reserve to other depository institutions overnight. It is not (as the name might initially suggest) the rate at which the Fed lends to financial institutions.
Federal Insurance Contribution Act (FICA) taxes
Every year a person works, the person and his/her employer contribute equal amounts (6.2% in 2005) up to the earnings cap and 1.45% of amounts over that to Social Security. If a person earns more than the cap, he/she continues to pay 1.45% of the total amount for Medicare. FICA taxes are also called payroll taxes.
Federal Reserve System
The central bank of the United States.
FICO score
Fair Isaac and Company software used by credit bureaus to calculate an individual’s credit risk provided to lenders; the higher the score the lower the risk but other factors are considered in addition to this score.
Financial investment
Money set aside to increase wealth over time and accumulate funds for long-term financial goals such as retirement.
Financial plan
A plan of action that allows a person to meet not only immediate desires but also long-term goals.
Fiscal policy
The spending and taxing policies used by the government to influence the economy.
Free riders
Persons who receive the benefit of a good but avoid paying for it.
Gross domestic product (GDP
The total market value, expressed in dollars, of all final goods and services produced in an economy in a given year.
Human capital
The knowledge, skills and experience that make a worker more productive.
Human resources
The resources provided to the economy by people who work (mental or physical work) in the economy.
Incentives
Perceived benefits that encourage certain behaviors.
Income
Earnings received as wages, rent, profit, or interest (alternative: payments received for providing resources in the market).
Individual Retirement Account (IRA)
– Accounts established by the Federal government in 1981 to encourage people to save money for retirement. Individuals with income from employment can deposit up to 10% of their earnings, to a maximum set by the government each year, into a special account set up using a bank, brokerage, or mutual fund as trustee or custodian. IRAs are self-directed, which means the individual chooses how the money is invested. Deposits in traditional IRAs are tax deductible. The money is taxed when it is withdrawn from the account.
Individual Retirement Account (IRA) Roth
A new type of IRA, established in the Taxpayer Relief Act of 1997, which allows taxpayers, subject to certain income limits, to save for retirement while allowing the savings to grow tax-free. Taxes are paid on contributions, but withdrawals, subject to certain rules, are not taxed at all. Individuals with income from employment can deposit a maximum amount set by the government each year into a special account using a bank, brokerage, or mutual fund as trustee or custodian. Roth IRAs are self directed.
