Basic Economics
Resources are limited, but human wants are unlimited.
What is scarcity?
A plan used to track income and expenses to live within your financial means.
What is a personal budget?
A numerical rating that shows how likely a person is to repay borrowed money.
What is a credit score?
The law stating that as price decreases, quantity demanded increases.
What is the law of demand?
Spreading investments across different assets to reduce risk.
What is diversification?
The value of the next best alternative that is given up when a choice is made.
What is opportunity cost?
A bank account mainly used for paying bills and everyday transactions.
What is a checking account?
A process lenders use to evaluate a borrower’s likelihood of repaying a loan.
What is a credit check?
The law stating that as price increases, quantity supplied increases.
What is the law of supply?
One way investors earn money from owning stock through company profit payments.
What are dividends?
Entrepreneurs use resources to produce goods and services, including land, labor, and capital.
What are factors of production?
A loan typically used to purchase a home or real estate.
What is a mortgage?
The main way banks make money by charging higher interest on loans than they pay on deposits.
What is lending at interest?
(or How do banks make money?)
When consumers switch to a cheaper alternative because a price increases.
What is the substitution effect?
Money earned by selling stock for more than its purchase price.
What are capital gains?
The total value of all final goods and services produced within a country in a given time period.
What is Gross Domestic Product (GDP)?
Interest earned on both the original investment and previously earned interest.
What is compound interest?
This federal agency insures bank deposits to protect customers if a bank fails.
What is the FDIC?
The point where supply and demand intersect on a graph.
What is equilibrium?
A business owned by one person with unlimited personal liability.
What is a sole proprietorship?
Unemployment that increases during recessions when businesses lay off workers.
What is cyclical unemployment?
A retirement plan that guarantees a fixed payment rather than depending on investment performance.
What is a pension?
A bank account best used for short-term savings or emergencies, but not ideal for retirement investing.
What is a savings account?
A government-set minimum price that cannot legally be charged below a certain level.
What is a price floor?
Organizations that work to improve wages, benefits, and workplace safety for workers.
What are labor unions?