Personal Finance Ch. 1-3

How do you build financial security? Spend less than you earn and save your money instead of spending it all.
Larry Burkett identified three primary reasons that people have financial Problems. What are they? Ignorance, indulgence, and slothfulness.
How do you calculate cost of living comparison? The way you calculate your expenses compared to how others calculate expenses.
What is the value of a bachelors degree vs. a high school diploma? 20%
The preferred stage of the economic cycle is? expansion phase
What is inflation? And how does the government measure inflation? It is the steady rise in the general levels of prices. The measure inflation by the Consumer Price Index.
During inflation, what typically goes up and what goes down? Does income keep up with inflation? Prices go up products go down. Income does not keep up with inflation.
What is GDP? Gross Domestic Product
What is interest? The cost of money or cost of borrowing someone’s money
What is opportunity cost? the cost of potential gain from other alternatives when one choice is made.
What is the difference between nominal and real income? Nominal income is how much you make, and real income is how much it’s actually worth when inflation is factored in.
What is the root of all evil? The love of money
What are the six Biblical purposes of money? 1.Give “First Fruits” to God2.Provide for your family3.Submit one’s taxes4.to build savings5.eliminate debt6.be generous and give to others
What are free market, command and mixed economics systems ? Free Market Economy is an economy that focuses on individuals making economic decisions. Individuals decide their own careers and/or training to pursue, what products or service to produce and/or consume. The government is absent from economic affairs. (EX: Capitalism)Mixed Economy is a system where most economic decisions are made in the marketplace by individuals. But the government plays a significant role, acting as a referee for market activity and influencing the allocation and distribution resources. Command Economics Systems are when the government has greater controls over the economy through controlled prices and wages, and redistribution of wealth. (EX: Socialism and Communism)
What are the key beliefs of Adam Smith’s theory for growing wealth? 1. The right to private property2. The right to own a business and keep all of the profits after tax3. The right to freedom of competition4. The right to freedom of choice related to work, where one lives and what one purchases.
What is tax-sheltered and tax-exempt Tax-sheltered is a legal method of minimizing or decreasing an investor’s taxable income and, therefore, his or her tax liability.Tax Exempt is an income that is totally and permanently free of taxes.
What is compounding interest? Compounding is when interest on an investment earns interest.Compounding is when interest on an investment earns interest.
What is the definition of present value and future value of money? Present value is how much a person need to deposit now to achieve a desired value in the future.Future Value is the value of an asset projected at the end of a particular time period in the future.
What is the fundamental concept behind an economic system? How the government plays a role in our economy.
Are we owners or managers of our money? Managers
How we handle our money defines our… measure of trust
What is the equilibrium price? The point where the suppliers of a product at the amount they are willing to purchase
The law of demand is… The amount of goods that people are willing and able to buy at a set price
What is the concept of elasticity demand? if the demand for a product is sensitive to price changes
What are examples of pro-cyclical economic indicators? retail salesindustrial productionnew orders for durable goodsinflationGross Domestic Product
What are examples of counter cyclical indicators? unemployment and prices of gold and silver, building permits
What are the potential problems with Capitalism/Socialism? Capitalism is government owns business controls economy and produce little. Socialism is heavy taxes, Workers less productive, less innovation

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