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Economics (Practical Personal Financial info (Deductions (Voluntary…
Economics
Practical Personal Financial info
Gross pay
Gross pay is the amount of money your employee receive before any taxes and deductions are taken out
Net pay
Is the amount one revives after taxes and deductions have been withheld during pay period.
Federal Tax
Tax levied by United States Internal Revenue Services(IRS) on the annual earning of induvudual,copeartions, trusts,or other legal entities
State Taxes
Colorado's state income tax rate 4.63% of the federal taxable income,regardless of your income level.
FICA taxes
The federal insurance contributions act is the federal law that requires you to withhold three separate taxes from the wages you pay your employees.
Fico Score
A person credit score calculated with software Fair Issac Corporation.(FICO)
Deductions
Voluntary
Deductions of amount paid for item such as insurance plan, and sometimes unions
Mandatory
The employer is required by federal and/or state law to deduct certain amount of the employee's pay and sent into an institutions or a goverment agency.
payday loans
Payday loans work
a small amount of money lent at a really high interest rate on the agreement to get paid back when the receiver receives his/her paycheck.
Predatory
Pay day loans are risky because of the high interest rate, really costly, and later into the future can lead into bigger finical problems.
Fixed-rate mortgage
Mortgage remains the same through the term of loan.
Sub prime, adjustable rate mortgage
Loan that is meant to offered to borrowers with impractical credit records
Price Theory: supply and demand
Demand
The law of demand states that as prices rise,people are willing and are able to buy.
20:80 rule
20% of consumers will buy 80% of a product.
Supply
At higher prices people choose to produce more, at lower prices,people choose to produce less
Market equilibrium
When the demand equals the supply that was given.
Surplus
Where there is not enough demand for the supply given. Excess products
Shortage
Where there is not enough supply for the demand is given. Not enough products
Demand shifters
Changes in income
more income = more spending
change in production
more people = more demand
changes in price
demand for lower prices related goods
changes in consumer info
more information passed down from consumers
changes in taste and preferences
new tastes= low sell on old products
supply shifters
Future expectations
If price rises save items to sell them on higher value
If prices drops sell your items to make the most
Technological changes
Better techno= more faster production and more efficient
Number of products
How many store are producing the product
cost of the products
Price elasticity of demand
If the products price changes and it changes the demand drastically,it has elastic demand. If a product price changes and it barely affects the demand.
Government price control
Price ceilings
Government imposed price control that prevents the price from rising too high. (Protects consumers)
Price floors
It is a government imposed price control that prevents the price from going too low.(protects sellers)
Measuring the health of the economy
Economy
system of production,consumption,and distribution of good and services in a particular geographic region.
GDP
Gross domestic product total market value for all goods and services produced in a country over a year.
Not included on GDP
Illegal activities
Non-market products
Or used goods
Equation for GDP
GDP=C+I+G+NX
Consumers+Business,investment+Government+Net Export(X-I)
Included on GDP
Foods
Clothing
Newspapers
Inflation
Increase in price of good,services over a period of time.
Consumer price index
Measures the changes in price paid by consumers for good and services.
Unemployment rate
No.of unemployed people/Labor force
The percentage of people who are activity looking for jobs but unable to find it.
Types of Unemployment
Frictional unemployment
Between college and work force,fired or looking for jobs
Structural unemployment
Some jobs that we don't need or have a demand for jobs.
Cyclical unemployment
When a lot of people losses their jobs.
Sectors of the economy
Primary
deals with harvesting raw material (farming,fishing,mining)
Secondary
Deals with processing raw material accursed through primary activities(processing foods)
Tertiary
Deals with activities forces on moving,selling and handling the products made in primary and secondary activities. (retail stores)
Underground
all illegal production of goods and services.(betting on sports)
Recession and responses to Recession
Business cycle
series of cycle of economic expansion and contraction.
Expansionary phase
Grows faster
Contractionary phase
real GDP in decline( 2 consecutive Quaters= recession)
Definitions of recession
period of general economic decline
Fiscal policy
Changes in government spending and taxes
expansionary
increase spending+ lowering taxes
Contractionary
Decrease spending = rising taxes
Multipliers
changes magnified effect over all economy
Debt
money owned or due
Deficit
amount of money that is too small
2009 recession
Mortage backed security
Pros- Banks gain money lot faster and were able to give out loans
cons- MBs weren't checked because of greed of banks for money. MBS filled with bad loans
Credit default swap
buying insurance for something. Monthly payments
Definition of recession
decline gdp over a year
Different philosophies
keynes vs hayek
hayek
government action makes recession worst
market profits if there is no government involvment
investment must come from saving
keynes
total spending in economic effect inflation
aggressive policy/fiscal policy
with out government recession wouldn't end
Paradox of thrift
Monetary policy
contractionary vs expansionary
rising gdp= expansionary
decreasing gdp = contractionary
fait money vs gold standards
Faint
no real value
gold
amount of money of a country by how much a gold a country has
federal reserve
controls supply of money
7 members of board governers
independent from politics
discount rate
interest rate banks need to pay to require money from from fed
low DR = expansionary
High DR= contractionary
Lower DR = more borring thus more spending
Open market operation
buying/selling treasure bonds
government take money
Behavioral economics/nudge
Choice architecture
Design of different ways in which choices can be presented to consumers, and the impact of the presentations on consumers decision making.
Libertarian paternalism
Giving people complete freedom in choice but manipulating them to make certain choices.
Nudge
To steer people toward certain choices by behavioral science but still allowing to make choices.
Basic Economics/Economic thinking
Macroeconomics
,
Microeconomics
, is the study of economics at individual,group or a company.
Production Possibility Frontiers
Often used to graph and analyze the choices and trade offs that the people make
Curve
is the graph that shows alternative ways to use the productive resources.
Factors of productions
Resources used to make all goods and services,are called factors of productions
entrepreneur
Person who brings all factors of productions together
Land
natural resources (gift) before changed by humans efforts .
Capital
tools of production,goods used to produce other goods/services.
Labor
Human effort used to produce goods and services.
Incentives
What motivates you to behave in certain way,while preference are your need, and what you desire.
Positive Incentives
rewards people for making certain choices or or behaving on certain way.
Negative Incentives
penalize people for making certain choices or behaving on certain way
Perverse Incentives
the result of unintended negative consequences due to action people take or receive
Opportunity cost
Always a cost to every opportunity
Diminishing marginal utility
low of economics stating that as a person increases consumption of a product while keeping consumption of other products constant.
Marginal analysis
Is an examination of the additional benefits of an activity compared to additional cost incurred by the same activity.
Scarcity
Scarcity
forces us all to make choices by making us decide with options are most important.
Macroeconomic
is the study of economics as a whole nation
Microeconomic
is the study of economics at individual,group or a company