Wealth
What is the difference between income (money earned) and wealth (net worth, assets, and property)?
income is money coming in, while wealth is the financial foundation you build from it.
How does a shift in consumer wealth alter the demand for luxury goods versus essential staples?
When wealth rises, demand for luxury goods increases disproportionately, as they are "normal goods" with high income elasticity
What is opportunity costs?
The value of the next best alternative that is given up when a choice is made
Which economic goal focuses on maximizing the output of goods and services while minimizing waste in the production process?
Economic Efficiency
Amounts owed (or credit utilization). This makes up 30% of your score and compares the amount of debt you currently have to your total available credit limit.
What is wealth?
In a broader sense, it refers to the state of having significant resources, which can span everything from monetary capital and real estate to intangible assets like health, relationships, and time. Wealth is different than rich
How does excess wealth concentrated in specific sectors (like real estate or tech) drive up market demand and inflate prices
Excess wealth concentrated in specific sectors inflates prices by funneling massive capital into a limited supply of assets. This drives the wealth effect, where affluent individuals and institutions spend more aggressively. Furthermore, high sector wages and corporate profits price average buyers out of local markets, severely distorting overall demand.
Why do people face opportunity costs?
Because resources such as time, money , and labor are limited
Why is "price stability" considered a critical goal for an economy?
It prevents high inflation or deflation, protecting the purchasing power of money and preventing a sudden spike in the cost of living.
What credit utilization ratio do lenders consider ideal on a credit card application?
Below 30%. However, experts suggest that a utilization rate of 15% or less is strongly correlated with exceptional credit scores
Is wealth inequality a natural byproduct of free markets, or are there systemic barriers that prevent equal opportunity?
Wealth inequality is both a natural byproduct of free markets and a consequence of systemic barriers
How does overall societal wealth affect the supply of loanable funds and investment capital for new businesses?
Rising societal wealth increases the supply of loanable funds and investment capital through higher household savings, larger institutional reserves, and greater risk capital availability. As wealth grows, more capital chases opportunities, which generally lowers borrowing costs for new businesses.
What is the opportunity cost of going to college?
The money and time that could have been earned by working instead
What is the goal of "economic equity" primarily concerned with?
Fairness and justice in the distribution of society’s wealth, income, and opportunities.
Which of the following actions has the most significant negative impact on a consumer's credit score?
Missing a scheduled monthly payment by 45 days
How does the current distribution of wealth in the U.S. and globally compare to historical periods
in the U.S., the top 1% holds around 30% of the nation's wealth, while the bottom 50% holds less than 3%
How does the demand for luxury or high-margin products prompt suppliers to shift their production away from budget items?
Suppliers shift production away from budget items toward luxury or high-margin products because of capacity constraints and the need to maximize return on investment.
Can opportunity cost involve more than money?
Yes, it can include time, experiences, or other benefits that are given up
What is the basic, universal problem that forces all societies to establish economic goals and prioritize them?
Which piece of personal information is explicitly included in the calculation of your FICO score?
Your history of student loan repayments
What is the role of government in redistributing wealth through taxes and social programs?
to mitigate economic inequality and provide a social safety net
Do changes in upper-class wealth disproportionately impact the demand for high-end services, whereas lower-class wealth impacts demand for baseline necessities?
Changes in upper-class wealth heavily drive the demand for luxury services because their discretionary budget is large. Conversely, the lower class spends a vast majority of its income on baseline necessities, meaning shifts in their wealth directly dictate demand for fundamental goods like food, rent, and basic healthcare
Why is understanding opportunity cost important?
It helps people make better decisions by considering what they are giving up
Why do societies generally pursue multiple economic goals simultaneously rather than just focusing on one?
Because the goals are interconnected; focusing solely on efficiency might ignore equity, while focusing solely on security might stifle growth and innovation.
A borrower takes out a personal loan, an auto loan, and opens a credit card. Demonstrating the ability to manage these different types of debt satisfies which FICO scoring category?
Credit Mix