101-9 Economic Env & Consumer Protection Laws

Question 1

Inelastic demand

Answer 1

A good is inelastic when quantity demanded responds little to price changes (food)

Question 2

Elastic demand

Answer 2

A good is elastic when quantity demanded responds greatly to price changes (luxury)

Question 3

Recession

Answer 3

Decline in real GDP for two or more successive quarters

Question 4

Depression

Answer 4

Persistent recession and a severe decline in economic activity

Question 5

Economics

Answer 5

The study of production, distribution, and consumption, or the study of choices in the presence of scarce resources

2 areas:
Microeconomics
Macroeconomics

Question 6

Microeconomics

Answer 6

The study of how individuals and companies make decisions to allocate scarce resources

Question 7

Macroeconomics

Answer 7

The study of an economy as a whole

Examines factors that affect a country’s economic growth

Question 8

3 key macroeconomic targets

Answer 8

• output or GDP
• price stability
• employment

Question 9

Supply

Answer 9

The amount of a good or service available for purchase by suppliers at a given price

Question 10

Demand

Answer 10

The quantity of goods and services consumers want to purchase at a given price

Question 11

Substitution effect

Answer 11

When the price of a good rises, consumers substitute other similar lower-priced goods

Question 12

Income effect

Answer 12

When the price of a good rises, consumers will discontinue or significantly reduce their use

Question 13

Price elasticity

Answer 13

The responsiveness of the quantity of a good demanded to changes in the good’s price, all other economic forces remaining constant

Inelastic: food and gasoline
Elastic: new boat

Question 14

Gross domestic product (GDP)

Answer 14

The total monetary value of all goods and services produced within the domestic US over the course of a given year, including income generated by a foreign firm

Constant dollars —> real gdp

Question 15

Gross national product (GNP)

Answer 15

The total market value of all goods and services produced by US residents’ labor and property

GNP measures production based on ownership

Question 16

3 major fed tools of monetary policy

Answer 16

• lowering or increasing the amount of required reserves that must be held by banking members of the Fed
• raising or lowering the fed’s discount rate
• engaging in open-market operations, which is the buying or selling of government securities in the open marketplace by the Fed

Question 17

Discount rate

Answer 17

The rate at which banks can borrow from any of the Federal Reserve Banks

Question 18

Federal funds rate

Answer 18

The interest rate charged on short-term borrowing (often overnight to fulfill reserve requirements) between banks

Question 19

Prime rate

Answer 19

The rate of interest charged by commercial banks to its best business and personal customers

Question 20

Recession

Answer 20

Occurs when the GDP has experienced a decrease in real terms for 2 consecutive quarters or a minimum of six months from a baseline of zero

Question 21

Depression

Answer 21

When the GDP has experienced a decrease in real terms for six consecutive quarters of a minimum of 18 months from a baseline of zero

Question 22

Leading indicators

Answer 22

Housing starts
New claims for unemployment
Bond yields
Orders for durable goods
Changes in investor sentiment

Question 23

Coincident indicators

Answer 23

Industrial production
Level of personal income
Amount of corporate profits

Question 24

Lagging or confirming indicators

Answer 24

Prime interest rate
Changes in CPI, particularly for services
Amount of business and consumer loans outstanding
Avg duration of unemployment

Question 25

Inflation

Answer 25

Increase in the general level of prices

Question 26

Rate of inflation

Answer 26

Rate of change in the general price level

Question 27

Disinflation

Answer 27

Decline in the rate of inflation

Question 28

Deflation

Answer 28

A decline in the general price level and is often caused by a reduction in the money supply and consumer demand

Question 29

Stagflation

Answer 29

Occurs when inflation and unemployment rise and the general growth of the economy is slow as business output falls

Question 30

Chapter 13 bankruptcy

Answer 30

Involves the adjustment of debts of an individual with regular income The debtor is not generally required to relinquish any assets in payment of creditors

Question 31

Chapter 7 bankruptcy

Answer 31

Historically most popular type of bankruptcy because an individual’s personal unsecured debts are generally cancelled

Question 32

3 Debts and obligations that are generally not dischargeable

Answer 32

- student and government loans - child support and alimony obligations - recent federal income taxes due

Question 33

Chapter 11 bankruptcy

Answer 33

Debtor remains in possession and may continue to operate the debtor’s business

Question 34

Consumer Credit Protection Act

Answer 34

Aka truth in lending act Requires lenders, before extending credit, to disclose both the dollar amount of finance charges and the annual percentage rate (APR), as well as other loan terms and conditions

Question 35

Fair Credit Billing Act

Answer 35

Requires consumers to notify the creditor in writing of any billing errors within 60 days of the date they receive the billing statement

Question 36

Consumer Credit Reporting Reform Act

Answer 36

Requires credit bureau reports to include accurate, relevant, and recent information about the financial situation of credit applicants

Question 37

Equal Credit Opportunity Act

Answer 37

Prohibits credit discrimination on the basis of race, color, religion, national origin, gender, marital status, or age

Question 38

Fair Debt Collection Practices Act

Answer 38

Prohibits debt collectors from engaging in certain practices such as contacting a debtor at his place of employment if the employer objects, harassing or intimidating the debtor, or using false or misleading practices

Question 39

Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act)

Answer 39

Enacted to establish fair practices and to enable consumers to better understand their credit transactions

Question 40

Privacy Act of 1974

Answer 40

Establishes a code of fair information practices that regulates the types of personal information the federal government can collect and how this information can be used

Question 41

Fair and Accurate Credit Transaction Act of 2003

Answer 41

Consumers can obtain a free credit report every 12 months from each of the three national credit reporting agencies, Equifax, TransUnion, and Experian Any theft should be reported to the FTC

Question 42

Skimming

Answer 42

When credit card information is stolen by using a special storage device when processing the card

Question 43

Phishing

Answer 43

Posing as a financial institution or company and sending spam over the internet to entice an individual to provide personal information