Economic Business Cycle, Consumer Protection (Lesson 3) Flashcards
(107 cards)
1
Q
How much should life insurance be
A
10-16 times gross pay
2
Q
How much should disability insurance be
A
60-70% of gross pay
3
Q
How much should should property insurance be (home and auto)
A
= FMV
4
Q
How much should an emergency fund be
A
3 to 6 months of non discretionary expenses
5
Q
Front end ratio is
A
28% = PITI divided by Monthly Gross Income
6
Q
Back end ratio is
A
36% = PITI + recurring debt payments divided by monthly gross income
7
Q
How much should Personal liability Umbrella policy be
A
$1 - 3 M in liability protection
8
Q
Around how much should a client save for education funding for 18 years for public state, semi private university, competitive private university
A
$3000, $6000, $9000
9
Q
At retirement an individual should have ___ times the amount of income needed annually saved
A
16 Times
10
Q
What should the savings rate toward retirement be generally
A
10-12%
11
Q
All clients should have the big three for legacy planning
A
- Will
- Durable Power of Attorney for Healthcare
- Advanced Medical Directive
12
Q
What are Economic Factors?
A
GDP, Inflation, Interest Rates
13
Q
What are Social Factors?
A
Customs, Beliefs, Status Symbols
14
Q
What are Political Factors
A
Forms of Government, Protectionism
15
Q
What are Legal Factors
A
Antitrust Acts, Consumer Protection
16
Q
What are Technological Factors
A
Current & New Technology
17
Q
What are taxation Factors
A
Income, Property, Payroll, and Sales Tax
18
Q
Impact of interest rate changes on investment returns
A
Inverse relationship
19
Q
How is purchasing power related to interest rates
A
Inverse relationship
20
Q
What is inflations impact on cost of goods, services, and money
A
Direct relationship
21
Q
What is the impact on wages with a change in unemployment rates
A
Inversely related
22
Q
What is monetary and fiscal policies impact on economic expansion/contraction
A
Direct relationship
23
Q
Demand Curve: As price ____ demand decreases
A
Increases
24
Q
Demand Curve: Anytime there is a change in price there is a ____ _____ the demand curve
A
Movement along
25
A shift in demand curve will happen when
There is an increase or decrease in:
- Income
- Taxes
- Savings Rates
- Disposable Income
26
Demand Curve: Anything that causes discretionary income to increase will shift the demand curve ___ \_\_\_\_
Up and to the right
27
Demand Curve: Anything that causes discretionary income to decrease will shit the demand curve ___ \_\_\_\_
Down and to the left
28
There is a movement along the supply curve when
There is a change in price
29
The supply curve will shift to the left or right because of a change in
Technology, Competition, Anything other than price
30
Supply Curve: Anything that causes production to improve will shift the supply curve
Down and to the right
31
Supply Curve: Anything that causes an increase in production costs or supply to decrease the supply curve will shift
Up and to the left
32
Price at which Supply equals Demand
Equilibrium
33
Substitutes are products
that serve a similar purpose
34
Complements are products
that are consumed jointly
35
What does price elasticity measure
the change in quantity demanded relative to changes in price
36
What is elastic demand
Quantity demanded responds significantly to changes in price
37
An elastic demand curve is
Almost horizontal sloping down and to the right
38
What is an inelastic demand
Quantity demanded changes very little to changes in price
39
An inelastic demand curve is
Almost vertical. Shape of an "I"
40
Business Life Cycle At Peak Inflation, Interest rates, Unemployment, and GDP (Highest/Lowest)
Inflation: Highest
Interest Rates: Highest
Unemployment: Lowest
GDP: Highest
41
Business Life Cycle At Trough Inflation, Interest rates, Unemployment, and GDP (Highest/Lowest)
Inflation: Lowest
Interest Rates: Lowest
Unemployment: Highest
GDP: Lowest
42
Business Life Cycle At Recession Inflation, Interest rates, Unemployment, and GDP (Decreasing/Increasing)
Inflation: Decreasing
Interest Rates: Decreasing
Unemployment: Increasing
GDP: Decreasing
43
Business Life Cycle At Expansion Inflation, Interest rates, Unemployment, and GDP (Decreasing/Increasing)
Inflation: Increasing
Interest Rates: Increasing
Unemployment: Decreasing
GDP: Increasing
44
During Expansion investments should be in
short duration bonds and equities
45
During Peak bonds, preferred stock, and high duration or fixed income assets should be
Sold
46
What assets do good in the Peak?
Equities and hard assets such as good and real estate
47
What should you do with Equities and hard assets in a Contraction/Recession? What should be invested in?
Equities and hard assets should be sold. Should invest in short term cash and bonds until the market settles down
48
What investments will do well in a Trough?
High Duration bonds
49
What does GDP measure
Amount of goods and services produced in the US regardless of ownership
50
What does GNP measure
the amount of goods and services produced by a country's citizens regardless of where the goods and services are produced
51
How long till be characterized a recession
6 consecutive months (2 quarters) of declining GDP
52
How long till be characterized a depression
18 months or six consecutive quarters
53
Inflation is defined as
increase of prices
54
What risk does inflation impact
Purchasing Power
55
What is galloping inflation
Money loses value very quickly
56
What is deflation
opposite of inflation where prices are falling
57
What is disinflation
decline or slowdown in the rate of inflation
58
What does the Consumer Price index (CPI) measure
the price change in a basket of goods and services at the retail level
59
What does the Producer Price Index (PPI) measure
price changes in the wholesale and manufacturing sectors
60
What are some Leading indicators that anticipate changes in the economy
- Initial unemployment claims
- Stock Prices
- Money Supply
- New manufacturing orders
- New Private housing units
- Consumer Sentiment
61
What are some Coincident indicators that anticipate changes in the economy
- Employees on Payroll
- Personal Income
- Industrial production
- Manufacturing sales
62
What are some Lagging indicators that anticipate changes in the economy
- Avg. duration of unemployment
- Change in the CPI
- Change in labor cost per unit
- Consumer credit to income
- Value of outstanding loans
- Avg. prime rate charged by banks
63
Who controls the Monetary Policy
Federal Reserve
64
The federal reserve has three main goals
- Maintain long term economic growth
- Maintain price levels supported by the economy
- Maintain full employment
65
As the reserve requirement _____ the money supply increases and interest rates \_\_\_\_\_\_
- decreases
- decreases
66
What are the Four tools of federal reserve?
- Reserve requirement
- Discount rate
- Open Market Operations (Buy/sell Treasuries)
- Excess Reserves
67
As discount rates decrease short term interest rates \_\_\_\_
Decrease
68
Does the Federal reserve control the prime lending rate?
No (not part of fiscal or monetary policy)
69
As the federal reserve buys Treasuries the money supply ____ and interest rates \_\_\_\_\_
- Increase
- Decrease
70
An increase in the reserve requirement: Money Supply (Inc or Dec) Interest Rates (Inc or Dec) Policy (Contractionary/Expansionary)
Money Supply - Decrease
Interest Rates - Increase
Policy - Contractionary
71
An increase in the discount rate: Money Supply (Inc or Dec) Interest Rates (Inc or Dec) Policy (Contractionary/Expansionary)
Money Supply - Decrease
Interest Rates - Increase
Policy - Contractionary
72
Sales of Treasuries in Open Market: Money Supply (Inc or Dec) Interest Rates (Inc or Dec) Policy (Contractionary/Expansionary)
Money Supply - Decrease
Interest Rates - Increase
Policy - Contractionary
73
An increase in the Excess reserve rate: Money Supply (Inc or Dec) Interest Rates (Inc or Dec) Policy (Contractionary/Expansionary)
Money Supply - Decrease
Interest Rates - Increase
Policy - Contractionary
74
An Decrease in the reserve requirement: Money Supply (Inc or Dec) Interest Rates (Inc or Dec) Policy (Contractionary/Expansionary)
Money Supply - Increase
Interest Rates - Decrease
Policy - Expansionary
75
An decrease in the discount rate: Money Supply (Inc or Dec) Interest Rates (Inc or Dec) Policy (Contractionary/Expansionary)
Money Supply - Increase
Interest Rates - Decrease
Policy - Expansionary
76
Buying of Treasuries in Open Market: Money Supply (Inc or Dec) Interest Rates (Inc or Dec) Policy (Contractionary/Expansionary)
Money Supply - Increase
Interest Rates - Decrease
Policy - Expansionary
77
An Decrease in the Excess reserve rate: Money Supply (Inc or Dec) Interest Rates (Inc or Dec) Policy (Contractionary/Expansionary)
Money Supply - Increase
Interest Rates - Decrease
Policy - Expansionary
78
Who controls Fiscal Policy
Congress
79
What are congress three goals related to fiscal policy
- Maintain economic growth
- Maintain Price stability
- Maintain full employment
80
What are congress three tools for which they can influence fiscal policy?
- Taxation
- Spending
- Debt Management
81
Normal yield curve is
concave sloping upward to the right
82
Inverted yield curve is
sloping downward to the right
83
Expansionary policy from both fiscal/monetary policy results in a
Normal yield curve
84
Contractionary policy from both fiscal/monetary policy results in a
Inverted yield curve
85
What act gives creditors ___ days to acknowledge receipt of a billing dispute and explain or correct the error within ___ days
Fair Credit Billing Act 30 days 90 days
86
What did the Truth in Lending act do?
- Lenders must disclose the total cost of financing, including the cost of any credit life insurance
- Interest must be stated in terms of APR
- Administered by the Federal Reserve
87
What did the Credit CARD Act of 2009 do?
- 45 day notice of interest rate increases
- debt paid on time during grace period cannot be assessed interest
- CC cannot be issued to someone under 21 unless they have a cosigner
- Late fees are limited to $25 ($35 if payment missed in last 6 months)
88
FDIC insurance applies to the amount in IRA's if
- the IRA is invested in bank deposits such as CDs.
- Does not cover mutual funds, stocks, bonds, or annuities
89
Is money held in a money market mutual fund FDIC insured?
No
90
What debts are not discharged through chapter 7 bankruptcy?
- Student and Government loans
- 3 years of back taxes
- Alimony and child support
- Monies owed due to malicious acts (drunk driving, criminal fines, or embezzlement)
91
What is chapter 7 bankruptcy
Relief through liquidation
92
Are debts related to negligence discharged in Chapter 7 bankruptcy?
Yes
93
What property is exempt from chapter 7?
- Homestead
- life insurance
- qualified plans
94
Are contributory traditional and Roth IRA's exempt assets in a chapter 7?
Yes up to 1 million
95
Are non spousal beneficiary IRA's exempt from chapter 7
No unless a trust is named as beneficiary
96
How much of qualified plans and converted IRAs is exempt in Chapter 7?
Unlimited as long as the IRA is marked rollover and no contributions have been made
97
Bankruptcy filing may remain on the credit report up to __ years
10 years
98
Who cannot use chapter 7 bankruptcy?
debtors average monthly income for their region is in excess of the threshold
99
What is a chapter 11 bankruptcy?
relief through reorganization for business or the self employed
100
What is chapter 13 bankruptcy?
Provides relief through adjusting debts
101
What form of liability is workers compensation?
Absolute
102
What is the maximum number of weeks to receive unemployment compensation?
39 weeks (26 weeks regular and 13 weeks is for periods of high unemployment)
103
What does ERISA do?
protects retirement plans of employees
104
What did the Securities Act of 1933 do?
- Regulated new issue securities in the primary market
105
What did the Securities Act of 1934 do?
- Regulates secondary markets
- Established the SEC
106
What did the Securities Investor Protection Act of 1970 do?
- Created the Securities Investor Protection Corporation (SIPC)
- provided coverage if a broker dealer because insolvent or unauthorized trading of investor accounts
107
What are the five factors of FICO
- Payment history
- Amount of debt
- Length of credit history
- New credit
- Type of credit
