Download Chapter 1: Personal Finance - Westmoreland Central School

Chapter 1: Personal Finance
business cycle "A wavelike pattern of economic activity that includes temporary phases that undulate from boom to bust:
expansion, recession (or depression), and recovery."
compound interest The process of earning interest on reinvested interest as well as on the original amount invested.
consumer price index (CPI) "A broad measure of prices, or the cost of living for consumers published on a monthly
basis by the U.S. Bureau of Labor Statistics."
consumption Spending on goods and services.
cost benefit shows that it is in your interest to take action or make a purchase only if the benefits are at least as great as
the cost.
deflation A steady decline in the general level of prices.
determination keeps you focusd on the final goal and helps you stick to the final project until the end
economics A science that focuses on how people, governments, and companies use limited resources to satisfy
unlimited wants.
economic growth A condition of increasing production and consumption in the economy—and hence increasing national
income.
economy "A system of managing the productive and employment resources of a country, community, or business."
employee benefit "Compensation for employment that does not take the form of wages, salaries, commissions, or other
cash payments."
entitlements services that are offered such as Medicaid, Medicare, and Social Security
expansion "phase in the business cycle where production is at high capacity, unemployment is low, retail sales are high,
and prices and interest rates are low or falling."
federal funds rate The rate banks charge one another on overnight loans.
financial literacy "The knowledge of facts, concepts, principles, and technological tools that is fundamental to being
smart about money matters."
financial security The comfortable feeling that your financial resources will be adequate to fulfill any needs you have as
well as most of your wants.
financial success "Achievement of financial aspirations that are desired, planned, or attempted."
forecasting "Predicting, estimating, or calculating in advance the state of the economy, inflation, and interest rates and
other economic trends."
future value (FV) The valuation of an asset projected to the end of a particular time period in the future.
financial happiness the satisfaction one feels about money matters
flexible spending account a tax-sheltered employee benefit
Globalization Gives consumers access to a vast diversity of goods and services through worldwide markets
Gross domestic product (GDP) "The value of all goods and services produced by workers and capital in the United
States, regardless of ownership."
human resource internal knowledge, experience, skills obtained
inflation A steady rise in the general level of the prices of goods and services.
interest The price of money.; The price of credit. ; The amount an investor receives for allowing an institution or individual
to use and invest any money that was lent.
investments Assets purchased with the goal of providing additional income from the asset itself.
importance identifying goals and ranking them to importance
income The money that you have to spend as measured in current dollars.
opportunity cost The most valuable alternative that must be sacrificed to satisfy a want. Also called alternative cost.; The
most valuable alternative that must be sacrificed to satisfy a want. Also called alternative cost.
marginal cost The additional (marginal) cost of one more incremental unit of some item.
non-human resource external money, time, equiment
priority when you decide that one thing is more important than another
personal finance "The study of personal and family resources considered important in achieving financial success; thus,
it involves how people spend, save, protect, and invest their financial resources."
personal financial planning The process of developing and implementing long-range plans to achieve financial success.
personal inflation rate The rate of increase in prices of items purchased by a particular person.
present value The current value of an asset that will be received in the future. Also called discounted value.
pretax dollars Money income that has not been taxed by the government.
principal "An amount invested.; The amount owed on a debt; A collection of stocks, bonds and other investments, such
as mutual funds, real estate, and gold; The amount of money an investor puts into an investment."
purchasing power A measure of the goods and services that one's income will buy.
recession The phase of the economic cycle marked by a decline in business activity or a downturn in the gross domestic
product.
recovery "The phase in the business cycle where levels of production, employment, and retail sales begin to improve
(usually rapidly), allowing the overall economy to experience some growth from its previously weakened state."
rule of 72 A formula that can be used to calculate the years until an investment amount will double by dividing the rate of
return on the investment into 72. It will also reveal the number of years until prices will double by dividing the inflation rate
into 72.
savings "Income not spent on current consumption.; Income not spent on current consumption. "
standard of living "The plane or content of living that an individual or group earnestly desires and seeks to attain, to
maintain if attained, to preserve if threatened, and to regain if lost"
tax-exempt income Income that is totally and permanently free of taxes.
tax-sheltered income Income exempt from income taxes in the current year but that will be subject to taxation in a later
tax year.
tax-sheltered retirement plan (or account) "Retirement savings and investment plans approved, or qualified, by the
Internal Revenue Service as vehicles in which to deposit tax-sheltered contributions. Also called qualified retirement plan."
time value of money The concept that dollars to be received or paid out in the future are not equivalent to those received
or paid out today.
utility The ability of a good or service to satisfy a human want.
Values things that influence the way you live, think, make decisions, and behave
wants things that you would like to have that are not essential
wealthy "Having an abundance of money, property, investments, and other resources."