VIRTUAL ECONOMICS & PERSONAL FINANCE EXAM REVIEW

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Commercial bank
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owned by stockholders and operated for profit. primary function to receive, transfer, and lend money to individuals, businesses, and governments. Full service banks, offer a wide variety of services
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Credit Union
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nonprofit financial cooperative owned by and operated for the benefit of its members. service offered only to members. Membership available through affiliation with an employer, a union, religious organization, community organization, or some other group. pay no federal income taxes and pay slightly higher interest rates on saving.
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Budget
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A plan for managing your money during a given period of time.
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Variable Expenses
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is a cost that changes in both the amount and time it must be paid. ex: food, clothing, medical expenses and entertainment
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fixed expense
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is a set cost that must be paid each budget period. ex: rent or mortgage, tuition, insurance, loan payments
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income
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the money you earn
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liability
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Insurance that pays for damages to someone else’s property.
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Wealth
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An abundance of assets that are accumulated over time
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net worth
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The difference between what a person owns and owes
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recordkeeping
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The process of setting up and maintaining an organized system for your financial affairs
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salary
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Payment for work that is expressed as an annual figure
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commission
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Income paid as a percentage of sales made by a sales person
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wage
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a payment in exchange for an employee’s labor or services. The payment, which is usually in money, is paid by the hour, day, or by the piece
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Medicaid
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a government program administrated by the states that pays certain health care costs for eligible low-income individuals and families (not to be mistaken for medicare which is for plp 65 and older)
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Medicare
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A federal government program that helps pay the medical expenses of people 65 and older and others with certain disabilities
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Payroll deduction
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an amount subtracted from gross income
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Social Security
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The federal governments program for providing income when earnings are reduced or stopped because of retirement, disability, or death
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Form W-4
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The employee’s withholding Allowance Certificate that tells the employer how much tax to withhold from an employee’s paycheck
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FICA
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Federal Insurance Contribution Act. the law that requires the collection of social security payroll taxes.
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benfeciary
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Person named by policyholder to receive the death benefit of an insurance policy
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term life insurance
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Insurance that covers the policyholder for a specific period of time- 5,10, or 20 years or until a specific age
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risk
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A measure of the likelihood that something will be lost
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deductible
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The amount you will be required to pay before insurance pays for any services
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premium
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Amount of money paid to an insurance company for a policy on a regular basis
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exclusions
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The services that are not covered in an insurance plan
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policyholder
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A person who owns an insurance policy
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preexisting condition
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An illness or injury a person has before signing up for a health care plan
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U.S. savings bond
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A savings tool that loans money to the U.S. government for a specified period of time. The bondholder is repaid with interest at the time of maturity. Low risk investment
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Certificate of deposit (CD)
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Money deposited for a set period of time that earns a set annual rate of intrest
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Compound interest
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Interest figured on money deposited plus intrest
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Money market deposit account
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non-financial account that pays interest based on current interest rates in the money markets.
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Regular savings account
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Put money in bank and earn interest. you can withdraw your money at any time without penalty
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Rule of 72
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A method used to estimate the amount of time or interest it will take for savings to double in value
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Simple interest
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Interest compound only on the principle. ( Interest that is calculated one time on the principal)
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Tax deferred
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Savings or earnings that are not taxed untill the funds are withdrawn
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Tax exempt
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Earnings that are free of certain taxes
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Stock
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A share in ownership of a corporation
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Mutual fund
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An investment created by pooling the money of many people and investing it in a collection of several securities
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Emergency fund
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an account that is used to set aside funds to be used in an emergency, such as the loss of a job, an illness or a major expense.
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FAFSA
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The Free Application for Federal Student Aid. a form that can be prepared by (future and current) college students in the United States to determine their eligibility for student financial aid.
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liquidity
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the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset’s price. / the ability to readily convert financial resources into cash without a loss in value
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bank reconciliation
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Report that accounts for bank statement and check book
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Grace period
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The time between the billing date and the start of interest charges
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APR
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Annual Perscentage Yeild. the annual cost of credit a lender charges
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Credit score
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a number assigned to a person that indicates to lenders their capacity to repay a loan. ranges from 300-850
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Credit limit
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the maximum amount a credit card company will allow someone to borrow on a single card.
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Annual fee
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charged by a credit card company each year for use of a credit card.
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Credit report
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A record of a person’s credit history and financial behavior
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Trade-off
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An item given up in order to gain something else
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Scarcity
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The challenge of stretching resources to cover needs and wants
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supply
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The amount of a product r service producers are willing to provide
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demand
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The amount of a product or service consumers are willing to buy
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globalization
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the tendency of businesses, technologies, or philosophies to spread throughout the world
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WTO ( World trade Organization)
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An international organization that mediates trade disputes among 151 member nations and establishes trade practices that are acceptable and fair to all nations
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NAFTA (North American Free Trade Agreement)
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An agreement that lowered trade barriers and opened markets among the US, Canada, and Mexico
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Opportunity cost
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The value of the best option or alternative given up in a trade-off
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Monopoly
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A market situation in which one seller produces the entire output of a given product or service
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Oligopoly
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A market situation in which a few large companies dominate an industry
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Antitrust law
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a collection of federal and state government laws that regulates the conduct and organization of business corporations, generally to promote fair competition for the benefit of consumers.
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Fiscal and monetary policy
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Fiscal: the government’s taxing and spending decisions Monetary: Government actions that change the amount of money in circulation by controlling interest rates and credit terms
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Inflation
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An overall increase in the price of goods and services
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Trade deficit/surplus
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Deficit: the loss of economic power due to a country importing more than it is exporting (import more than export) Surplus: Gain of economic power bc exporting more than it is exporting
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Balance of payments
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an account of the flow of goods, services, and money coming into and going out of the country
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Economics of scale
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The concept that the cost of producing an item decreases as the number of unit being produced increases
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Outsourcing/offshore outsourcing
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Outsourcing: a company moving sections of its business to other companies or to its own subsidiaries Offshore: Moving sections of a business to another country
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Trade barriers
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Any action taken to control or limit imports
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tariff
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a tax or duty to be paid on a particular class of imports or exports
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What are the disadvantages and advantages to renting?
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Advantage of rent: Fewer financial responsibilities More free time Less financial risk Greater mobility Disadvantage: No buildup of equity Little control No tax benefits Renters’ financial responsibilities include rent utilities maintenance of the rental unit
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What are the disadvantages and advantages to owning?
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Advantage: Can increase wealth Tax benefits Greater control and freedom Sense of permanence, source of pride and satisfaction Disadvantage: Greater costs and financial responsibilities Less mobility Complicated relationships when friends or roommates buy a home together Greater financial risk
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What are some things you should consider when purchasing a vehicle?
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-The automobile marketplace: Traditional dealership, Internet, Auto superstores, private seller or auction -Assessing car needs: Size, appearance, performance, handling, safety record and features, fuel efficiently, warranty, hybrid or imported, domestic or imported – your budget -four point check: In the driver’s seat, on the road, under the hood, on paper
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What are the different types of life insurance?
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-Term life insurance: provides protection for a limited or specific period of time, ex. one, five, ten, or twenty years. renewable at the end of the term, but at higher costs. advantage; offers most protection for your insurance dollar. for those who really need insurance and cannot afford high premiums. -Whole life insurance: also called straight life insurance. provides lifetime protection so long as premiums are paid. advantage; builds cash value, able to borrow against cash value at low interest rate. premiums are fixed but Disadvantage; premiums are high Types of Whole life insurance: -Limited payment policies: premium payment over a stated period of time, such as 20 years, or until you reach a certain age. disadvantage; premiums are higher. advantage; cash value builds faster than for standard whole life and although premium payments stop, coverage continues . -Variable life: premiums are fixed. insurance combined with investment feature. advantage; possibility of gaining earnings; policy’s face value and investment rise when fund does well; you are guaranteed a minimum face value. disadvantage: may not offer the best of insurance or investment opportunities -Adjustable life:Premiums, face value, and payment period can be adjusted Advantage: flexibility Disadvantage: need to monitor
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What are the different types of life insurance?
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-Term life insurance -Whole life insurance -Limited payment policies -Variable life – Adjustable life
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What is the formula for simple interest and the Rule of 72?
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Simple interest: computed only on the principle or amount of money originally deposited. =Principle * Interest rate * number of periods Rule 72: to calculate # of years it will take for $ to double, divide 72 by rate of interest
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How do you calculate sales tax?
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What is the difference between gross pay and net pay?
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Gross pay: how much an employee earns. before deductions net pay: how much an employee actually takes home, after deductions
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What is the risk-to-return relationship?
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the bigger the risk the higher the chance of a big return. the smaller the risk the smaller the return
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How do you calculate Social Security withholdings?
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Know the types of economies and the characteristics of each
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-Traditional economy:Found mostly in underdeveloped countries. Based on a society’s values, cultural, and customs. -Market: Decisions and activities of consumers impact businesses. Businesses react to consumers’ needs. Businesses have the opportunity to grow and profit. Individuals are given incentives to succeed. Privately owned businesses operate and compete for profit with limited government regulation or interference. -Command economy: Commonly found in socialist and communist countries. A central authority, usually government, decides how resources are allocated, decides who will produce what, sets prices and decides how much to produce
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What are the three types of endorsements? (endorse a check)
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-Blank endorsement: requires only the signature of the payee (the person who the check is for) -Restrictive endorsement: may be used only for the specific purpose stated in the endorsement. ex. for deposit only. -special endorsement: used to transfer a check to another party. only the person named in the endorsement can cash the check. ex. Pay to the order of ___
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What are the three credit reporting agencies?
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– Equifax – Experian – TransUnion LLC
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Know how to calculate a capital gain/loss and dividends.
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capital gain: income earned from selling an asset for more than the purchase price Loss: investor looses money because the selling price of an investment is led than the purchase price

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