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Questions and Answers
What is the highest possible credit score?
What is the highest possible credit score?
A higher deductible on an insurance policy leads to a higher premium cost.
A higher deductible on an insurance policy leads to a higher premium cost.
False
What is an insurance premium?
What is an insurance premium?
The amount of money paid to an insurance company for coverage.
Diversifying your investments means spreading your money across a variety of different ______.
Diversifying your investments means spreading your money across a variety of different ______.
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Match the following insurance terms with their definitions:
Match the following insurance terms with their definitions:
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What does APR stand for?
What does APR stand for?
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Chapter 13 bankruptcy typically involves the liquidation of assets.
Chapter 13 bankruptcy typically involves the liquidation of assets.
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What is the definition of net pay?
What is the definition of net pay?
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FICA includes deductions for _____ and Medicare.
FICA includes deductions for _____ and Medicare.
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Match the following bankruptcy types with their characteristics:
Match the following bankruptcy types with their characteristics:
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What typically distinguishes a bank from a credit union?
What typically distinguishes a bank from a credit union?
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Interest rates can vary based on the type of loan and the borrower.
Interest rates can vary based on the type of loan and the borrower.
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How do you calculate a person's net worth?
How do you calculate a person's net worth?
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What type of tax increases as a person's income increases?
What type of tax increases as a person's income increases?
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Simple interest is calculated based on the total amount borrowed, including previous interest.
Simple interest is calculated based on the total amount borrowed, including previous interest.
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What does a bond represent?
What does a bond represent?
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What is the most important part of a person's credit report in determining their FICO score?
What is the most important part of a person's credit report in determining their FICO score?
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When you purchase a stock, you are guaranteed to receive dividends.
When you purchase a stock, you are guaranteed to receive dividends.
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A pay stub helps employees understand what funds were withheld from their _____ to arrive at their net pay.
A pay stub helps employees understand what funds were withheld from their _____ to arrive at their net pay.
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What is one primary advantage of mutual funds compared to individual stocks?
What is one primary advantage of mutual funds compared to individual stocks?
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Match the terms with their definitions:
Match the terms with their definitions:
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A _______ IRA allows you to withdraw money tax-free in the future after paying taxes on contributions.
A _______ IRA allows you to withdraw money tax-free in the future after paying taxes on contributions.
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Match the following terms with their definitions:
Match the following terms with their definitions:
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Which type of tax is commonly associated with consumption, resulting in lower taxes for those who save more?
Which type of tax is commonly associated with consumption, resulting in lower taxes for those who save more?
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What is a characteristic of a traditional IRA?
What is a characteristic of a traditional IRA?
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Insurance primarily serves the purpose of protecting assets and sharing liabilities.
Insurance primarily serves the purpose of protecting assets and sharing liabilities.
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Explain the difference between simple and compound interest.
Explain the difference between simple and compound interest.
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Stocks represent a diversified portfolio of different companies.
Stocks represent a diversified portfolio of different companies.
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What does it mean to diversify your investments?
What does it mean to diversify your investments?
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Study Notes
Macro Midterm Study Guide
-
Types of Taxes:
- Proportional: The tax rate remains the same regardless of income. Example: US property tax
- Progressive: The tax rate increases as income increases. Example: Current US income tax system
- Regressive: The tax rate declines as income increases; taxes on consumption. Example: US sales tax
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Simple vs. Compound Interest:
- Simple Interest: Interest is calculated only on the principal amount borrowed.
- Compound Interest: Interest is calculated on the principal and accumulated interest.
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Fixed vs. Variable Interest:
- Fixed Interest: Interest rate remains constant throughout the life of the loan.
- Variable Interest: Interest rate can change over time. Legally, it can't change more than 30%.
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Amortization:
- Definition: An accounting method that gradually reduces the book value of a loan or intangible asset over time.
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Components:
- Periodically lowers the asset's book value over a set period.
- Spreads out loan payments over time.
- Decreases the value of an intangible asset gradually.
- Reflects the actual value of an asset or liability over its entire life.
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Pay Stub:
- A document provided to employees with their paychecks.
- Used to confirm deductions and the net pay amount.
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Credit Reports/FICO Scores:
- Payment history is the most important factor in determining a person's credit score.
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Insurance Purpose:
- Asset protection
- Shared liability reduction
- Risk reduction
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Shared Liability:
- A model where all parties involved in a lawsuit share responsibility for damages.
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Interest Rate:
- A measure of the cost of a loan to a borrower expressed as a percentage.
- Applies to the outstanding loan balance over regular periods.
- Varies widely based on product and borrower characteristics.
-
APR:
- Stands for Annual Percentage Rate.
- The yearly interest rate charged or earned on a loan or investment.
-
College Tuition Programs:
- Details on specific programs are missing
-
Chapter 7 vs. Chapter 13 Bankruptcy:
-
Chapter 7 (Liquidation):
- Selling non-exempt assets to repay creditors.
- Usually a few months long.
- Discharges most unsecured debts.
- Eligibility based on income.
-
Chapter 13 (Reorganization):
- Keeps assets while repaying debts over 3-5 years.
- Reorganizes debts based on income and ability to pay.
- Suitable for individuals needing to restructure finances.
- Partial debt forgiveness is possible.
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Chapter 7 (Liquidation):
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Net Pay: Money received after all deductions.
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Gross Pay: Total wages or salary before deductions.
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Net Worth: Total assets minus total liabilities.
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FICA:
- Federal Insurance Contributions Act includes social security and Medicare programs.
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Banks vs. Credit Unions:
- Banks serve anyone seeking their services while credit unions are for members only.
- Banks are businesses; credit unions are non-profits.
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Bond vs. Stock:
- Bond: Debt; issuer repays principal and interest.
- Stock: Ownership; no guaranteed return.
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Mutual Funds vs. Stocks:
- Mutual Funds: Pool of investments (stocks, bonds,etc.); offering diversification and professional management
- Stocks: Investment in single company's ownership; directly tied to company performance.
-
Roth vs. Traditional IRA:
- Traditional IRA: Deductible contributions; taxed at withdrawal
- Roth IRA: Non-deductible contributions; tax-free withdrawals
-
Investment Diversification:
- Spreading investments across different asset types to reduce overall risk.
-
Highest Credit Score: 850
-
Insurance Premium: Regular payment for insurance coverage.
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Deductible: Amount an insured needs to pay out-of-pocket before insurance pays.
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Description
Prepare for your macroeconomics midterm with this comprehensive study guide. It covers essential topics such as types of taxes, interest calculation, and loan amortization methods. Test your understanding of these key concepts in economics.
