Economic Business Cycle, Consumer Protection (L4) Flashcards

1
Q

Economic Environment

A
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2
Q

Demand

A
  • Reflects the Quantity of a good or service that the consumers are willing to purchase
  • Price INCREASES ==> Quantity Demand DECREASES
  • Price DECREASES ==> Quantity Demand INCREASES
  • Change in Price (“Change in Quantity Demanded”) = MOVEMENT along demand curve (NOT Shift)
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3
Q

Shift in DEMAND CURVE

A
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4
Q

Supply

A
  • Reflects the Quantity of a good or service that businesses are willing to supply at a given price.
  • Price INCREASES ==> Quantity Supply INCREASES
  • Price DECREASES ==> Quantity Supply DECREASES
  • Change in Price (“Change in Quantity Supplied”) = MOVEMENT along Supply curve (NOT Shift)
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5
Q

Shift if SUPPLY CURVE

A
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6
Q

Substitutes

A
  • Products that have similar purposes
  • A price change in one product changes the quantity demanded for another product
    ○ EXAMPLE ==> The price for movie tickets increases. Then the
    demand for movie rentals increases as well.
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7
Q

Compliments

A
  • Products that are consumed jointly
  • A price change in one product changes the quantity demanded for another product
    ○ EXAMPLE ==> If razors are on sale, then the demand for razor
    blade may increase. (They are complementary products)
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8
Q

Elastic Demand

A
  • Quantity Demanded responds SIGNIFICANTLY to price changes.
  • EXAMPLES:
    ○ Airline tickets
    ○ Movie tickets
    ○ Alcohol
    ○ LUXURY GOODS
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9
Q

Inelastic Demand

A
  • Quantity Demanded responded VERY LITTLE to price changes.
  • EXAMPLES:
    ○ Milk
    ○ Gas
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10
Q

Business Life Cycle (pg. 67)

A
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11
Q

GDP vs. GNP

A
  • Gross Domestic Product (GDP)
    ○ Measures the amount of goods and services produced in the
    US, regardless of ownership
  • Gross National Product (GNP)
    ○ Measures the amount of goods and services produced by the
    country’s citizens, regardless of where the goods/services are
    produced.
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12
Q

Inflation

A

Inflation = INCREASE IN PRICES

LOSS of purchasing power

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13
Q

Moderate Inflation

A

Prices are SLOWLY INCREASING. (1-2%)

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14
Q

Galloping Inflation

A

Money loses value VERY QUICKLY

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15
Q

Deflation

A

OPPOSITE of inflation –> prices are falling

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16
Q

Disinflation

A

Decline or slowdown in the rate of inflation

17
Q

Measures of Inflation

A
  • Consumer Price Index (CPI)
    ○ Measures the price change in a basket of goods and services
    at the RETAIL LEVEL.
    ○ Historically 2-3%
  • Producer Price Index (PPI)
    ○ Measures price changes in the WHOLESALE and
    MANUFACTURING sectors
18
Q

Economic Indicators

A
19
Q

Monetary Policy (FED)

A
20
Q

4 tools used to influence the money supply and interest rates (pg. 72)

A
21
Q

Fiscal Policy (Congress)

A
22
Q

3 tools used to influence fiscal policy

A
23
Q

Yield Curve

A
  • A diagram that plots the current interest rates against the term to maturity for similar securities, such as TREASURIES
  • Normal Yield Curve = concave, sloping UPWARD to the right
  • Inverted Yield Curve = convex, sloping DOWNWARD to the right
  • Fiscal and Monetary Policy will help determine the shape
    ○ EXPANSION (Ease) –> Normal
    ○ CONTRACTION (Tight) –> Inverted
24
Q

Consumer Protection Laws

A
  • Protect “weak” consumers from powerful corporations
  • Protect honest businesses from less-than-honest businesses
  • FEDERAL TRADE COMMISSION
    ○ Protects both consumers and businesses
25
Q

Fair Credit Reporting

A
  • If a consumer is REFUSED credit or employment based upon information contained in a credit report, the consumer must be provided with the information in the report.
  • 3 main credit bureaus:
    ○ Equifax
    ○ Experian
    ○ Transunion
  • Consumers have the right to one free credit report ONCE A YEAR from each of the three bureaus
26
Q

Fair Debt Collection Act

A

○ Collection telephone called are limited to 8AM-9PM

○ Collectors must contact your attorney if you have an attorney

○ Collection calls are NOT PERMITTED at work if your ER forbids such calls

27
Q

Fair Credit Billing Act

A

○ Gives a creditor 30 days to acknowledge receipt of billing dispute and explain or correct the error within 90 days

○ A consumer’s liability for a lost or stolen credit card is limited to $50 OR the actual amount charged on the card, WHICHEVER IS LESS

28
Q

Truth in Lending Act

A

○ Lenders must disclose the total cost of financing, INCLUDING the cost of any credit life insurance

○ Interest must be stated in terms of APR

○ Truth in Lending Act is administered by the FED

29
Q

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

A

○ Card companies must give cardholders 45 days’ notice of any interest rates increases

○ Card companies CANNOT charge interest on debt that is paid on time during the grace period

○ A credit card CANNOT be issued to someone under age 21 UNLESS they have a co-signer who is over 21

○ Late fees are generally LIMITED to $25 ($35 if a payment was missed in the last 6 months)

30
Q

FDIC Insured

A
31
Q

Bankruptcy Laws

A

Chapter 7 - provides relief through liquidation

Chapter 11

Chapter 13

32
Q

Chapter 7 - provides relief through liquidation

A
  • Debts that are NOT discharged
    ○ Student and Government loans
    ○ 3 years of back taxes
    ○ Alimony and Child support
    ○ Monies owed due to malicious acts, drunk driving, criminal
    fines and penalties, or embezzlement
    ○ Debts related to fraud (negligence = discharged)
  • Exempt property:
    ○ Homestead
    ○ Life insurance
    ○ Qualified plan
  • ** Exempt Assets
    ○ IRAs, up to $1M as indexed every three years.
    (Inherited NON-Spousal Beneficiary IRA = NO bankruptcy
    protection, UNLESS trust is named)
33
Q

Chapter 11

A

Provides relief through reorganization for business or the self-employed

34
Q

Chapter 13

A

Provides relief through adjusting debts

35
Q

Worker Protection Laws

A
  • Workers’ compensation
    ○ An absolute form of liability
    ○ Regardless of fault, if injured at work, the EE will collect
    benefits
  • Unemployed Compensation
    ○ Provides moderate income replacement, for specified period of time, if an employee loses his job
    ○ Insurance premiums are funded by tax on ERs
    ○ Maximum number of weeks to receive unemployment is 29
    with regular benefits lasting up to 26 weeks
    ○ Additional 13 weeks for periods of high unemployment
  • Social Security
    ○ Provides OASDI (Old Age, Survivor and Disability Beliefs)
  • ERISA
    ○ Protects retirement plans for EEs
36
Q

Investor Protection Laws

A
  • Securities Act of 1933
    ○ Regulates NEW issues of securities in the PRIMARY MARKET
    ○ NEW Issues = IPO
  • Securities Act of 1934
    ○ Regulates SECONDAY MARKET
    ○ Established the SEC, whose primary function is to regulate the
    securities market
  • Securities Investor Protection Act of 1970
    ○ Created SIPC (Securities Investor Protection Corporation)
    Provided coverage if a BD becomes INSOLVENT or if there is
    unauthorized trading in an investors account
37
Q

Debt Management

A
  • FICO (Fair Isaac Corporation)
    ○ Commonly used by lenders to assess potential borrowers CREDIT RISK
    ○ Score Range from 350 - 850
    § Goal is 790 or better
    ○ 5 factors the affect credit scores:
    § Payment history (LARGEST FACTORS)
    § Amount of debt
    § Length of credit history
    § New credit
    § Type of credit