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Economics – Personal Finance

Automobile Insurance
– This is used as protection against financial loss in the event of an accident while driving, or theft.
– Example: The consumer pays premiums in exchange for coverage, like liability or comprehensive.
Bond
– This is a contract to repay borrowed money, often issued by a company. This issues financial security for a debt.
– Example: an IOU for a long-term debt, usually agreeing to pay interest
Certificate of Deposit
This type of investment account has a specific fixed term/length, fixed interest rate, is insured by the FDIC, and is very low risk to consumers.
Compound Interest
– This is a method of calculating interest in which the interest is added to the principal each period so that the principal continues to grow throughout the life of the loan or investment. The formula is A = C * (1 + r/100)n where A is the future value, C is the principal, r is the interest rate per period, and n is the number of periods.
– Example: How much interest is earned if $8800 is placed in an account that pays 4.5% compounded monthly for 3.5 years. C = 8800, r = 4.5/12, n = 12(3.5) so A = 8800(1 + .375/100)42 therefore A = 10298.08 and the interest earned was 10928.08 – 8800 = 1498.08.
Credit
– Ability to obtain goods and services before payment, or money lent or made available, both with specific guidelines for repayment.
– Example: Some people have ___________ cards in their wallet.
Credit Union
– A nonprofit cooperative that accepts deposits, makes loans, and provides other financial services
– Example: operates like a bank but not-for-profit, and usually owned by its members
Credit Worthiness
This is a measurement as to the likelihood of whether or not a person will default on a loan provided to them by a lending institution.
Current Yield
The annual interest rate paid by a bond. It does not reflect the interest rate paid over the life of the bond.
Debt
This situation occurs when an entity- a person, business, or government- owes money to another entity.
Deductible
The dollar amount of expenses that must be paid out of pocket before an insurer will pay any expenses for loss or liability.

Example: You wreck your car and do $1200 in damages. If you have a $500 deductible, you would pay the first $500 and your insurance would pay the $700.

Disability Insurance
– A type of insurance paid to an individual if he/she is injured and is unable to work for a specified length of time.
– Example: AFLAC
Disposable Income
This is the economic term that refers to one’s total income that is left following the payment of all required taxes.
Dividend
– This is a portion of corporate profits paid to stockholders.
– Example: usually paid quarterly, one of the ways to profit from stock ownership
Earnings
This is a payment usually of money for labor or services usually according to contract and on an hourly basis.
Excise Tax
– This is a tax on production, transportation, sale or consumption of a certain good or service.
– Example: gas tax, cigarette tax
Health Insurance
– This is used to pay for expenses related to maintaining the wellness of a person. Among countries, there are many varieties of government and privately-sponsored programs.
– Example: Premiums, deductibles, and co-pays are associated with this term.
Incentive
– Any factor, usually financial, to influence one choice over another by an individual or business.
– Example: The company offered the employee a $5000 signing bonus to work for the company.
Income
– This is money that is gained for goods or services by an individual or business.
– Example: The minimum salary for a rookie in Major League Baseball is approximately $500,000.
Income Tax
This is a tax levied on net personal or business income.
Inflation
– A rise in the general level of prices.
– Example: reduces the value of a dollar, usually measured by the Consumer Price Index
Insurance
– A form of risk management purchased by a business or individual against a possible financial loss paid in the form of a monthly or annual premium.
– Example: Health, Auto, Disability
Interest
– This is a total charge that is applied to a person when they borrow money.
– Example: You pay it when you use a credit card.
Interest Rate
– The percentage of a financial loan which is paid as a fee over a period of time.
– Example: APR
Investment
– Although it has many definitions, this is generally the act of providing funds to a financial organization for the purposes of making that organization more profitable, while earning a personal profit at the same time.
– Example: Stock market, Mutual funds
IRA
– This is special savings account created for an individual to spend when the person stops employment completely. It often has many tax advantages over a regular savings account.
– Example: Roth, Simple
Lender
– The institution or individual that loans money to an individual or business at a set interest rate over a set period of time.
– Example: Bank, Mortgage company, Credit Union
Liability
To be at fault, either financially or legally.
Life Insurance
A special type of insurance paid to family or primary beneficiary at the time of death of the policy holder.
Loss
The dollar amount of an insured’s financial injury by death or damage that the insurer is financially responsible.
Monetary
– The term ___ Policy refers to a plan of the government to regulate the money supply in the nation.
– Example: in the United States the Federal Reserve System controls this by adjusting interest rates
Money Market
A type of checking account that also earns interest. These accounts generally have a higher minimum balance.
Mutual Fund
– A collection of investments, usually stocks, bonds, and other securities managed by a portfolio manager. The collective investment gains or loses value as a group. Generally the group of items spread the risk of items purchased individually. The net proceeds are passed to the individual investors.
– Example: Vanguard Index
Personal Debt
This term typically refers to money that a person owes to someone or to a financial institution.
Preferred Stock
– Certificate of ownership in a corporation which does not entitle the holder to vote, but does give claim to the assets of the company before the common shareholder
– Example: Most stockowners own common stock rather than this type
Premium
– The amount to be charged for a certain amount of insurance coverage.
– Example: You purchase insurance for you car for 6 months. The premium for that insurance is $750. The amount is your premium.
Prime Rate
– The lowest interest rate which banks charge their most reliable customers
– Example: other interest rates often depend on this rate
Professional
– A worker with a high level of specialized training or education that is almost always formalized.
– Example: Doctors, Lawyers, Accountants, Teachers
Progressive Tax
– A tax where the percentage paid in tax increases as the level of income rises
– Example: federal income tax is an example of this type of tax
Property Tax
This tax is locally assessed, varies according to the worth of land and goods on it, and generally funds things like public schools.
Property Insurance
This specific type of policy is used as protection against financial loss in the event of damage to a structure or land.
Proportional Tax
This is a type of taxation that takes the same percentage of one’s income regardless of how much or how little one makes.
Regressive Tax
– This is a type of taxation that takes a higher percentage of one’s salary as one’s income decreases.
– Example: Sales taxes are an example of this kind of tax.
Return
The profit or loss derived from an investment.
Risk
The potential that an investment will lose money.
Sales Tax
– This is a tax on goods and services, a percentage of the retail price.
– Example: Some states have it, some states do not.
Savings
This is the name to a type of bank account used by a person who wants to safely store their money over a long period of time, earning interest during that process.
Semi-skilled Labor
– Workers that may master a specific job with a few weeks of limited training.
– Example: Assembly-line Workers, Construction Workers
Simple Interest Formula
– The formula I = prt, where p stands for principal, r represents rate, and t represents time in years.
– Example: If you put $100 (p) in an savings account with a 2% interest rate (r) for 1 year(t), this is the formula you would use to see how much money you would make.
Skilled Labor
– Labor with a high level of training, education, and experience.
– Example: Plumbers, Welders, Electricians
Skills
The abilities acquired by workers through education, training, and experience that permit workers to be more productive.
SPLOST
– This tax can be levied by any county for the purpose of funding the building and maintenance of parks, schools, roads, and other public facilities.
– Example: The Special Purpose Local Option Sales Tax adds an additional 2% onto the existing state sales tax of 4%
Stock
Certificate of ownership in a company which entitles the shareholder to vote for the board of directors of the corporation.
Unskilled Labor
– This is the economic term for workers who are not trained to do a specific task or operate specialized machinery.
– Example: this is the lowest classification of workers in the workforce

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