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Personal Finance Economics EOC Review

Terms in this set (38)

Positive incentive
Reward to act in a certain way
Negative incentive
Punishment for not acting in a certain way
Credit union
Financial institution that requires membership, but has lower loan rates.
Commercial bank
Financial institution that has many services, but higher loan rates.
stock
Share in the ownership of a company. Has high risk with the potential of high return.
bond
Loan to a government or corporation. Has low risk with low returns.
Mutual fund
Investment option in which money is placed into many different stocks. There is a medium amount of risk with the potential of medium returns.
Progressive tax
Tax which taxes those with higher incomes more than those with lower incomes
Regressive tax
Tax which taxes those with lower incomes more than those with higher incomes
Proportional tax
Tax that taxes all income groups the same percentage
Credit worthiness
Refers ones ability to borrow money
deductible
Money that must be paid to an insurance company before the company will pay to fix damages.
premium
The cost of insurance.
Which investment would be BEST for you if you are not concerned with a large return, but worried about risk?
Savings account
The Federal Income tax is an example of which type of taxes?
Progressive
Which type of investments would give investors dividends?
Stocks
What is the impact of investing?
Postponing current rewards
Everyone in Mooneyland pays a tax rate of 10%. What type of tax system is this?
Proportional
Which group of people is harmed by higher taxes?
Lower-Income
What is the purpose of banks charging higher interest rates on loans but paying lower interest rates for savings/deposits?
To earn a profit
Which type of financial institution offers low interest rates for loans but requires membership?
Credit union
Which investment offers the lowest amount of risk?
Savings Account
Which type of financial institution is owned by shareholders, insured by the FDIC, and offers a wide range of services?
Commercial Bank
If the risk associated with an investment increases, what happens to the amount of possible returns?
Increases
Nick makes $15,000 per year and pays 4% in taxes. Sarah makes $90,000 per year and pays 2% in taxes. Which type of tax system is this an example of?
Regressive
Which type of tax system taxes higher incomes at higher rates?
Progressive
Mr. Moneybanks wants to invest a large amount of money and isn't worried about the risk involved. He just wants a large return for his investment. Which type of investment is the best choice for Mr. Moneybanks?
Stocks
Stocks have the potential for very high returns. What is the other major characteristic of stocks?
High risk
What should be considered when making a rational economic decision?
Wants & needs, short-term goals, long-term goals
Which type of financial institution requires physical collateral for a loan?
Title Pawn
What amount of risk & return is associated with retirement accounts?
varies, depends on investment
What is the benefit of placing money in a certificate of deposit (CD) instead of a savings account?
Higher amount of interest
What are the characteristics of commercial banks?
Owned by shareholders, formed to make a profit, charge more interest than they pay
What are the characteristics of credit unions?
Owned by members, not formed to make a profit, offer lower interest rates
Which group of people is hurt the most by gentrification?
Lower-income
Why would someone borrow from a payday lender instead of a bank?
Credit issues in the past
What is the difference between a traditional IRA and a Roth IRA?
Roth allows you to pay taxes now and traditional allows you to pay taxes later
What is usually included in a monthly budget?
Earned income, individual expenses, total expenses, savings goal
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