The Economy (TM)
What is inflation?
the general increase in prices over time; it reduces your purchasing power because each dollar buys less than it did before
What are the two most common forms used to report income?
W2 & 1099
List two ways to legally reduce the amount of taxes you owe.
Contributing to a 401(k), claiming deductions/credits like a home office expense.
Does a good credit score can help you qualify for better interest rates on loans?
yes
What is the difference between active and passive income?
Active Income: Income earned as a result of work performed on an ongoing basis. Give your time to get money.
Passive Income: Income earned from an asset. Make something once that continues to pay you as time passes. You do the work upfront and it pays you even after the initial work is done.
What percentage of jobs required a college degree as of 2021?
68% of jobs required a college degree as of 2021.
What is the difference between gross and net income?
Gross income is before deductions; net income is what you take home.
What are federal income taxes used for?
Federal income taxes fund public programs like military, infrastructure, social services, and government salaries.
What is the main risk of using payday loans?
High interest and fees can trap borrowers in a cycle of debt.
What is the “R” in a S.M.A.R.T. Goal?
Relevant
What is one major cause of inflation?
Demand-pull inflation: When demand exceeds supply.
Cost-push inflation: When production costs (like wages or raw materials) increase.
What is the purpose of a W-4 form?
To adjust tax withholdings from your paycheck
What type of tax system does the US follow?
The U.S. federal tax system is progressive, meaning tax rates increase with income.
What is the debt-to-income ratio and why do lenders care about it?
DTI. Debt-to-income ratio compares monthly debt payments to income; lenders use it to assess repayment ability.
How much money is in a fully-funded emergency fund?
3-6 months worth of expenses
What is the Time Value of Money and why does it matter?
Time Value of Money: Money today is worth more than the same amount in the future due to its earning potential.
What does a pay stub show, and why is it important?
A pay stub shows earnings, taxes withheld, and deductions; it's important for budgeting and verifying income.
Explain the difference between tax deductions and tax credits.
Deductions reduce taxable income; credits reduce taxes owed directly.
What does "APY" stand for and how is it different from "APR"?
APY = Annual Percentage Yield; includes compound interest, while APR = Annual Percentage Rate and may not.
APY is how much money an asset pays you, APR is how much interest you pay to borrow money.
Describe opportunity cost.
the loss of potential gain from other alternatives when one alternative is chosen.
What you lost out on because you chose another option
What is the CPI and what does it measure?
Consumer Price Index: The weighted average price of consumer goods and services.
Explain the difference between being paid for your time vs your expertise.
Time: Paid by the hour/salary; Expertise: Paid for skill, results, or unique knowledge.
What is a Standard Deduction? Bonus: What is the Standard Deduction for 2025?
The standard deduction is a specific dollar amount that reduces the amount of taxable income.
In 2025, the standard deduction is $15,000 for single filers and married persons filing separately, $22,500 for a head of household, and $30,000 for a married couple filing jointly and surviving spouses
How is a credit score determined and why does it matter?
Based on payment history, credit usage, length of credit, new credit, and types of credit; it affects loan eligibility and rates.
What is soft ROI?
Soft ROI is the qualitative and less tangible benefits of an investment. It's often difficult to quantify in monetary terms, such as brand awareness, company reputation, customer experience, and improved business processes.