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Unit 1 - FEC

TermDefinition
Economics the study of how people try to satisfy their unlimited needs and wants using limited resources
Micro-Economics studies the behavior of small units; (peoples, households, businesses)
Macro-Economics studies the behavior of the economy as a whole; (the United States economy)
Scarcity the condition that results from society not having enough resources to produce all the things people would like to have
Needs basic requirements for survival
Wants a way of expressing a need
Shortage the lack of something that is temporary and can be fixed
Scarcity cannot... be fixed, exists everywhere, all the time, means there is a limit to the resource
Factors of Production productive resources needed to produce goods or services
Capital tools/equipment/factories used to make the product; created by humans
Entrepreneurship risk taking individuals who introduce new products or services in search of profits
Labor people with all their abilities and efforts
Land any natural resource used in a product; not created by humans
Cost-Benefit Analysis a process of weighing the expected costs against expected benefits to determine the best course of action/solution
Trade Offs the alternative that must be given up when one choice is made over another.
Opportunity Cost the cost of the next best alternative use of money, time, and resources when a choice is made over another; DOES imply a value/cost to your choices
PPC/PPF represents all possible combinations of goods and/or services an economy can produce when all productive resources are fully employed.
Where is overproduction located in relation to the PPC line? outside/ to the right of the PPC
Where is underproduction located? inside/to the left of the PPC.
Capital Goods a man-made product used by a business to create consumer goods or more capital goods
Consumer Goods products used by consumers.
Durable Goods provide services or utility over time
Non-durable Goods consumed immediately.
Step 1 Save $1,000 into an emergency fund. ($500 if you make under $20,000)
Step 2 Pay of all debt, except house using debt snowball.
Step 3 Save 3 to 6 months of expenses into savings.
Step 4 Invest 15% of your income into Roth IRA’s and pre-taxed retirement plans.
Step 5 Save a college fund for your kids.
Step 6 Pay off your home early.
Step 7 Build wealth and give.
Why is compound interest so powerful? it makes your money grow faster from it being calculated using the accumulated interest over time and the original investment.
Give an example of a PAC’s. A PAC (political action committee) is a tax-exempt 527 organization that uses its campaign contributions from donations to campaign against candidates, etc. An example of this would be “3M Company PAC”.
What is an emergency fund? How much should you put in one? An emergency fund is a sum of money you set aside and save in case of emergencies such as car troubles or hospital bills.
Explain how someone would use debt snowball. Someone would use debt snowball by paying the minimum on all their debts except their smallest. Once they have paid of their smallest debt, they take the money they used to spend on that payment to help pay off their next smallest debt. So on.
What are the 3 reasons for saving money that Dave Ramsey identifies? The 3 reasons for saving money that Dave Ramsey identifies are to create an emergency fund, to have enough money to make a large purchase, or to invest.
What is the sinking fund approach? The sinking fund approach is an approach used to set aside money to pay off a specific expense you know is coming. With this approach you save a certain amount of money every month to save money for your expense.
Why is diversification important in regard to your investments? Diversification important in regard to your investments because it reduces risk and may lead to a higher return/profit.
Created by: williscallip
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