Finance Chapter 1 Review – Flashcards
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consumer
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a person or organization that uses a product or service
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credit
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the granting of a loan and the creation of debt; any form of deferred payment
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debt
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an obligation of repayment owed by one party (the debtor/borrower) to a second party (creditor/lender)
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economy
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a system by which goods and services are produced and distributed
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financial literacy
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the knowledge and skillset necessary to be an informed consumer and manage finances effectively
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interest
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a fee paid by a borrower to the lender for the use of borrowed money
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loan
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a debt evidenced by a "note," which specifies the principal amount, interest rate and date of payment
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personal finance
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all of the decisions and activities of an individual or family regarding their money, including spending, saving, budgeting, etc.
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the 4 money personalities
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frustration, role models, pragmatic, and money isn't everthing
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the 3 steps to becoming money smart
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1. you need to be comfortable with basic math 2. you must start learning the language of money 3. you need to learn how to manage your behavior with money (this is the most hardest)
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the 3 levels of financial well-being
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1. survival 2. comfort 3. secure
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the 7 key components of financial planning
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1. access your financial situation 2. set money goals 3. detailed plan 4. execute your plan 5. know your money personality 6. regularly monitor and reassess your financial plan 7. replace money myths with truths
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learning the language of money is not that important because you will be able to depend on financial planners to manage your money
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false
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which of the following is NOT a reason credit is marketed so heavily to consumers in the United States
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the use of credit is not socially accepted
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during the great depression, new deal policy makers came up with mortgage (home loans) and consumer lending policies that convinced commercial banks that:
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consumer credit could be profitable
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when it comes to managing money, success is __% behavior, and __% head knowledge
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80, 20
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describe the mistakes americans often make when it comes to money
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getting loans, buying things they can't afford, and going into debt
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explain why understanding your money personality is important when it comes to developing a money plan that's right for you
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savers will have less work to do and won't need as much discipline as spenders, who will step away from their bad spending habits
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does the history of credit and consumerism segment make you view the use of credit differently than you did before
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yes, because now I know that I should only buy something if I have the money for it and absolutely need it
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explain how marketing can affect your decisions when it comes to spending money
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it can encourage us to buy now and pay later which is not good
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does managing your money well mean that you can't have fun with your money
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no, you can always budget some money for fun activities
