Personal Economics

Question 1

What is income?

Answer 1

Total money received by a person from salary or wages, interest or dividend

Question 2

What is disposable income?

Answer 2

Amount of money households have available for spending, and saving after income taxes have been accounted for

Question 3

What is discretionary income?

Answer 3

Income remaining after a deduction of taxes, Social Security charges and basic cost of living

Question 4

What are savings?

Answer 4

Putting some of your wages or salary aside for later use

Question 5

What is debt?

Answer 5

An amount of money you owe to the person or company

Question 6

What are opportunity costs?

Answer 6

The benefit you lose the result of a choice taken

Question 7

What is spending?

Answer 7

Exchange of money for goods and services

Question 8

What does tangible mean?

Answer 8

Something that can be seen and touched

Question 9

What does intangible mean?

Answer 9

Something that cannot be seen or touched

Question 10

What are different types of savings? (6)

Answer 10

• Bank accounts
• Building society
• ISA
• Credit union
• Government, bonds
• Pension funds

Question 11

Why do people save? (6)

Answer 11

• University fees
• Safe retirement
• Good interest rates,
• Saving for an emergency,
• Saving for a student flat
• Fear of job loss

Question 12

What is the effect of an increase in interest rates on a saver?

Answer 12

Value of savings will increase, people are therefore likely to save more money

Question 13

What are the effects of an increase in interest rates on borrowers? (3)

Answer 13

• Increase the cost of borrowing so people have to pay back more
• Increase the cost of borrowing so people borrow less
• Increase mortgage repayments therefore people have less to spend on other products, so their standard of living will fall

Question 14

What’s the definition of bank loans?

Answer 14

A loan of money we paid overtime with interest

Question 15

What are the advantages of bank loans? (2)

Answer 15

-They’re quick in easy
- They can be repaired over a long period of time

Question 16

What are the disadvantages of bank loans? (1)

Answer 16

• Interest could be expensive

Question 17

What’s the definition of bank overdraft?

Answer 17

Taking more money out of the bank account than is available

Question 18

What are the advantages of bank overdraft? (1)

Answer 18

• Easy and quick to arrange for a short period of time

Question 19

What are the disadvantages of bank overdraft? (2)

Answer 19

• Usually only through small amount of money
• Daily charge and/or interest applied

Question 20

What’s the definition of a credit card?

Answer 20

Plastic card issued by financial organisation with a certain limit agreed for borrowing. Interest is paid if you don’t pay it off each month

Question 21

What are advantages of credit cards? (1)

Answer 21

• Consumer protection if something goes wrong

Question 22

What are disadvantages of credit cards? (2)

Answer 22

• Can encourage spending
• Interest rates can rise

Question 23

What is the definition of payday lenders?

Answer 23

Lenders to provide a very short term loan for a relatively small amount of money

Question 24

What are the advantages of payday lenders? (1)

Answer 24

-Loan of small amount

Question 25

What are disadvantages of payday lenders? (2)

Answer 25

• High interest rates
• Penalties if not paid off