Glossary
Asset items that one owns; they can be financial or non-financial in nature
Balanced budget (government) revenues equal expenditures
Banks corporations chartered by state or federal government to offer numerous financial services such as checking and savings accounts, loans, and safe deposit boxes; the Federal Deposit Insurance Corporation (FDIC) insures accounts in federally chartered banks
Barter the direct trade of goods, services and resources without the use of money
Benefit something that is favorable to the decision maker
Borrowing obtaining or receiving something on loan with the promise or understanding of returning it or its equivalent
Budget a plan for managing income and expenses
Budget deficit (government) a shortfall of revenues compared to (with?) spending
Budget surplus (government) an excess of revenues compared to (with) spending
Capital gains gains from selling stocks or other financial investments for more than what was paid for them
Capital resources (capital) goods, such as tools and buildings, that are produced for the purpose of producing other goods and services. They are used over and over again in the production process.
Choices decisions
Commissions fees to a third party for assisting in a business transaction, such as buying or selling an asset
Comparative advantage nations or individuals producing a good or service at the lowest opportunity cost when compared with other nations or individuals. This results in a more efficient use of scarce resources.
Competition many buyers and sellers trading identical products so that each buyer and seller is a price taker
Compound interest interest credited daily, monthly, quarterly, semi-annually or annually on both principal and previously credited interest
Consequences outcomes that logically or naturally follow from an action or condition, consequences can occur with the decision maker or to an uninvolved party
Consumers people whose wants are satisfied by using goods and services
Costs something that is unfavorable to the decision maker
Creative satisfaction bringing ones ideas for a good or service to fruition
Credit a contractual
agreement in which a borrower receives something
of value now and agrees to repay the lender at some later date
Credit Bureaus organizations to which business firms apply for credit information on prospective customers
Credit reports statements containing financial information about prospective customers or borrowers furnished by credit bureaus
Credit Unions not-for-profit cooperatives of members with some type of common bond (e.g. employer) that provide a wide array of financial services, often at a lower cost than banks
Creditworthy having the ability and willingness to repay debts
Debt an obligation or liability to pay or render something to someone else
Deduction an expense subtracted from adjusted
gross income when calculating taxable income, such as for state and local taxes
paid, charitable gifts, and certain types of interest payments. Also called tax
deduction.
Demand the quantity of goods, services or resources that consumers are willing and able to buy at all possible prices in a given time period
Diversification to distribute money among several financial investment tools in order to average the risk of loss
Dividends periodic payments of the profit of a corporation to its stockholders or owners
Economics - the study of principles that provide the basis for efficient decision-making on resource allocation among competing wants for a society
Economic growth an increase in the total output of an economy; it occurs when a society acquires new resources or when it learns to produce more using existing resources
Employee benefits something of value that an employee receives in addition to a wage or salary. Examples include health insurance, life insurance, discounted childcare and subsidized meals at the company
Employer-Sponsored Savings Plans a government-approved program through which an employer can assist workers in building their personal retirement funds
Entrepreneurs people who organize, manage, and assume the risks of a firm, taking a new idea or a new product and turning it into a successful business
Exemption a direct reduction taken from taxable income for a specific reason, as allowed by the IRS, such as the personal exemption
Externalities the positive or negative side effects that result when the production or consumption of a good or service affects the welfare of people who are not the parties directly involved in a market exchange
Export a good produced in one country that is shipped to and sold in another country.
Federal Reserve System the central bank of the United States
Financial investment money set aside to increase wealth over time and accumulate funds for long-term financial goals such as retirement
Financial plan a plan of action that allows a person to meet not only immediate desires but also long-term goals
Fiscal policy the spending and taxing policies used by the government to influence the economy
Free riders persons who receive the benefit of a good but avoid paying for it
Goods objects that can satisfy peoples wants
Gross Domestic Product (GDP) the total market value, expressed in dollars, of all final goods and services produced in an economy in a given year
Human capital the knowledge, skills and experience that make a worker more productive
Human resources the resources provided by people who work (mental or physical work) in the economy
Import a good purchased in one country that has been produced in another country
Incentives perceived benefits that encourage certain behaviors
Income earnings received as wages, rent, profit, or interest. (alternative: payments received for providing resources in the market for those resources)
Inflation a sustained increase in the average price level
Interest the price of using credit
Interest rate the price of using credit expressed as a percentage of the amount owed
Intermediate goods things produced by people and used up in the production of other goods and services
Investment the purchase of new capital resources. (A more sophisticated definition is the diversion of resources from the production of goods and services for current consumption to the production of goods that increase the economys productive capacity.)
Labor unions worker associations that bargain with employers over wages and working conditions
Leasing entering into a rental agreement
Liquidity the quality of an asset that permits it to be converted quickly into cash without loss of value
Loan a sum of money provided temporarily on the condition that the amount borrowed be returned, usually with an interest fee
Market a group of buyers and sellers of a particular good or service
Market system an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
Medicare a federal government program of transfer payments for certain health care expenses for citizens 65 or older
Medium of exchange what sellers generally accept and buyers generally use to pay for goods and services
Monetary policy the behavior of the Federal Reserve System regarding the money supply
Money anything that is used as a medium of exchange
Money supply the quantity of money available in the economy
National debt the total amount of outstanding government securities held by the public
Natural resources physical inputs that occur naturally in our world, such as trees and oil deposits
Net worth statement a record of what a family or person would own after paying off all liabilities; assets liabilities = net worth
Opportunity cost the value of the highest foregone alternative
Payroll deductions amounts subtracted from a paycheck as the government requires or the employee requests. Mandated deductions include various taxes. Voluntary deductions include loan payments or deposits into saving accounts.
Per capita GDP Gross Domestic Product divided by population
Personal Finance - the study of principles, knowledge and skills that provide the basis for resource allocation among competing wants for an individual or a household.
Personal income taxes a tax levied on a persons annual income
Price what people pay when they buy a good or service and what they receive when they sell a good or service
Price ceiling a legal maximum on the price at which a good can be sold
Price floor a legal minimum on the price at which a good can be sold
Principal the original amount of money invested, excluding any interest or dividends
Producers people who use resources and intermediate goods to make goods and services
Productivity a ratio of output to input. For example, output per worker is a measure of the productivity of labor. The productivity of a firm can be increased through specialization or division of labor, investment in human capital, and investment in capital resources
Profit the revenue remaining after a business has paid its costs of production. Profit is the income payment to entrepreneurs.
Property rights having the legal authority to control the use of an item one owns
Property taxes required payments on ones property to local government
Public goods goods that cannot be sold effectively in the marketplace; these goods are characterized by shared consumption and non-exclusion. As a result, government usually provides these goods, such as national defense.
Purchasing power a measurement of the relative value of money in terms of the quantity of goods and services it can buy
Rate of return the annual rate of return on an
investment, expressed as a percentage of the total amount invested. Also called
return.
Rent to Own to borrow with the intent to take permanent possession through purchase
Resources peoples services and things used to produce goods and services
Risk exposure to loss of financial investment and economic investment due to a variety of causes such as business failure, stock market volatility, and interest rate changes; in business, the likelihood of loss or reduced profit; the danger or probability of loss to an individual
Salaries payments for work, usually calculated in periods of a week or longer. Salary is usually tied to the completion of specific duties over a minimum but not maximum number of hours
Sales taxes taxes levied on the retail price of merchandise and collected by the retailer
Save to set aside income (earnings) for future use
Saving the process of setting aside income (earnings) for future use
Savings an accumulation of money set aside until a future date
Savings and Loan Associations financial institutions that provide loans and interest-bearing accounts
Scarcity the condition of not being able to have all of the goods and services that one wants; it exists because human wants for goods and services exceed the quantity of goods and services that can be produced using all available resources
Self-employment work for oneself, not for an employer
Self-interest acting to achieve a desired outcome to the acting individual
Services actions that can satisfy peoples wants
Shortage a market condition in which the quantity demanded exceeds the quantity supplied at the existing market price, or where buyers want to buy more of a good or service than sellers want to sell
Social Security a federal government program of transfer payments for retirement, disability, or the loss of income from a parent or guardian
Specialists people who produce a narrower range of goods and services than they consume
Specialization individuals or groups producing a smaller range of goods and services than they consume
Spending using income (earnings) to buy goods and services
Standard of living a measure of the goods and services affordable by and available to a person or a country; the dollar value is calculated as per capita GDP
Surplus a market condition in which the quantity supplied exceeds the quantity demanded at the existing market price, or when sellers want to sell more of a good or service than buyers want to buy
Supply the quantities of goods, services, or resources that producers are willing and able to sell at all possible prices in a given time period
Tariff a tax on goods produced abroad and sold domestically
Tax credits an amount that a taxpayer who meets certain criteria can subtract from tax owed. Examples include a credit for earned income below a certain limit and for qualified post-secondary school expenses.
Tax-deferred income whose taxes can be postponed until a later date. Examples include IRA, 401(k), Keogh Plan, annuity, Savings Bond and Employee Stock Ownership Plan.
Tax-exempt income that is not subject to tax
Taxes government fees on business and individual income, activities, or products
Technological change the introduction of new methods of production or new products intended to increase the productivity of existing inputs or to raise marginal products
Technology the body of knowledge used to produce goods and services
Tips amount paid beyond what is required, usually to express satisfaction with service quality; also know as a gratuity
Trade to give in exchange for something else; trade can involve money or barter
Trade barriers policies that restrict or stop the flow of trade among countries
Trade-off the act of giving up some of one thing to have more of another
Transfer payments payments by governments, such as social security, veterans benefits, and welfare, to people who do not supply current goods, services, or labor in exchange for these payments
Unearned income money received for which no exchange was made, such as a gift
Unemployment the number of people over 16 years of age without jobs who were actively seeking work within the past 30 days
Voluntary exchange to trade of ones own volition
Wages payment for work, usually as calculated in periods of an hour rather than longer
Wants desires that can be satisfied by consuming a good or service
Wealth accumulated assets such as money and/or possessions, often as a result of saving and investment