Basic Economic Principles
This term refers to the basic economic problem of having unlimited wants but limited resources.
What is scarcity?
The practice of spreading investments across different types of assets to reduce risk.
What is diversification?
This is the portion of your income that you save, after paying for expenses and taxes.
What is discretionary income?
This international organization provides loans to countries in need of financial assistance, often for development projects.
What is the World Bank?
This is the money a person or business owes to others.
What is debt?
The law stating that as the price of a good increases, the quantity demanded decreases.
What is the Law of Demand?
This type of investment fund pools money from many investors to purchase securities like stocks and bonds.
What is a mutual fund?
This type of budget is where expenses are categorized by needs (necessities) and wants (non-essentials).
What is a zero-based budget?
The system of exchange rates where a currency's value is determined by market forces, not by a central authority.
What is a floating exchange rate?
This type of financial document is used by companies to list their assets, liabilities, and shareholder equity at a given point in time.
What is a balance sheet?
The term for a market structure where there is only one producer or seller of a good or service.
What is a monopoly?
The average annual return on an investment, calculated as the compound annual growth rate over a specified period.
What is CAGR (Compound Annual Growth Rate)?
This budgeting method allocates specific amounts to particular categories like rent, groceries, and entertainment, aiming to balance income and expenses.
What is the envelope system?
A measure of the total value of all goods and services produced in a country in a given year.
What is GDP (Gross Domestic Product)?
This term refers to the percentage of your investment returns paid to you over a year in the form of dividends.
What is dividend yield?
This economic model is based on the idea that all goods and services in an economy are exchanged in a circular flow.
What is the Circular Flow Model?
The type of bond issued by a corporation to raise capital, typically offering higher yields but also higher risk than government bonds.
What is a corporate bond?
The term for an unexpected expense, such as medical bills or car repairs, that can derail a budget if not planned for.
What is an emergency fund?
This theory argues that countries should specialize in producing goods in which they have a comparative advantage
What is comparative advantage?
The process of dividing the cost of a long-term asset over its useful life for accounting purposes.
What is depreciation?
The idea that when one person’s consumption of a good or service reduces its availability for others, that’s called this.
What is rivalry in economics?
The practice of selecting investments based on the potential of the company to grow over the long term rather than short-term market fluctuations.
What is value investing?
The 50/30/20 rule suggests allocating 50% of income to needs, 30% to wants, and 20% to this financial goal.
What is savings?
The term for a sustained increase in the general price level of goods and services in an economy, usually expressed as a percentage. What is inflation?
What is inflation?
The total value of all assets, including stocks, bonds, and real estate, minus liabilities.
What is net worth?