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1.A progressive tax is one in which the amount of tax one pays increases with income.
2.Regressive tax is one in which people pay a higher percentage of tax the less money they make.
3.Proportional tax is one in which everyone pays the same amount proportional to their income.
4.Inflation is the rise in prices.
5.The government can actually use fiscal policy to encourage or help stop inflation.

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1.Comprehensive liability insurances covers a much wider range of catastrophes.

2.Insurance involves transferring risk to others.

3.Life insurance is meant to provide money to your family if you die.

4.Health and medical insurance is meant to cover health and medical expenses, many of which lead to outrageously expensive bills.

5.Disability insurance provides a policy holder with income in the event that they become disabvled and unable to work.

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bankruptcy a legal statement that an individual is unable to pay lenders, involving a court process that protects people while they repay debts or the court removes the debts
debt-to-income ratio the amount of debt compared to income; a ratio used to determine if an individual has excessive debt

foreclosure a process in which a lender tries to regain property because the borrower has not made payments

garnishment a process when a lender tries to obtain money from an individual's employer to pay an unpaid debt

lien a claim to take and hold property until a debt is paid

1.Most adults have some debt.

2.They might owe money on their home loan or they might have a credit card balance.

3.Having some debt is not bad. 4However, having too much debt or excessive debt is bad.

5.What does excessive debt look like? For one person, excessive debt may mean owing $1,000. For someone else, excessive debt may mean owing over $900,000. One of the best ways to figure out if you have too much debt is by calculating your debt-to-income ratio.

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credit report a report prepared by a credit bureau that shows details of an individual's credit history; used by a lender to determine whether an individual is creditworthy
credit score a number that lenders look at to see if an individual is creditworthy; also called a FICO score
creditworthy having an acceptable credit rating; considered responsible to borrow money
inquiry a request for a person's credit report
installments equal payments usually made over several years

1.A credit report includes some basic personal information, such as your name, current and previous addresses, telephone number, Social Security number, date of birth, and current and previous employers.
2.It contains a credit history for each credit account you've owned, including the date it was opened, credit limit or loan amount, balance, monthly payment, and your payment pattern over the past several years, including any bankruptcies or unpaid balances.

3.Your credit report also shows your job history, if you own your own home, and if you've been sued or arrested.

4.It's best to know what's on your credit report before you try to obtain credit.

5.Experts recommend that you obtain a copy of your credit report at least once per year.

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401(k) a retirement plan that some private corporations offer their employees

403(b) a retirement plan available to employees of nonprofit organizations, such as schools and hospitals

fund manager the professional who decides where to invest money in a mutual fund

investing using money in order to try to make more money

IRA a retirement account that lets you save and invest money tax-free until you withdraw it when you retire

1.Before you think about investing, there are some steps you should take.

2.First, you should be debt free.

3.If you have any credit card debt, you should pay it off.

4.Credit card debt is expensive. It may cost as much as 15 to 20 percent of the amount you owe, and it's pretty unlikely you'll make more than 15 to 20 percent on an investment.

5.For example, if you have a balance of $1,000 on your credit card, and you are being charged 20 percent interest, you would be paying $200.

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budget a plan for how you will spend and save your money
fixed expenses costs that remain the same amount

variable expenses costs that change in amount

1.In Unit 1, you calculated your net worth and wrote financial goals. 2.Remember, your net worth is the amount you have, minus the amount you owe.
3.The amount you have includes cash on hand, money in the bank, and items you own that have value, such as a car or house.
4.These are called assets.
5.Amounts you owe include things like car loans, student loans, or a credit card balance. These are called liabilities.

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dependent someone who depends on another individual for food, shelter, and other necessities, usually a child
filing status a category on tax forms that is closely tied to marital status; categories are: single, married, head of household, and widower
IRS Internal Revenue Service; a government agency that is responsible for collecting taxes
tax return form a tax form that an individual completes to calculate how much is owed to or refunded by the IRS

W-2 form a tax from that an employer sends to employees after the end of the year to list income and amount paid in taxes

1.If you worked in the past year and earned more than $9,350, you will need to fill out and file a tax return.
2.("File" is just another way of saying "send to the IRS").
3.Also, if you worked and your employer deducted money for taxes, you should file a tax return to figure out if you get a refund.
4.The purpose of the tax return form is to calculate whether you paid too much or too little over the past year in taxes.
5.If you paid too much, you will receive a refund. If you paid too little, you will owe more money.

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financial anything that has to do with money and investments
literacy an individual's knowledge of a certain area or field
warranty a written guarantee given to the purchaser, usually specifying that the manufacturer will make any repairs or replace defective parts free of charge for a certain period of time

1.Susan should become more knowledgeable.
2.She needs to figure out how much she could afford each month on her house payment.
3.In addition, she should talk with a loan expert to find out what loan amount and type of loan would be best for her.
4.Becoming financially literate is more than learning the definitions of certain words.
5.It is also about knowing the process or steps to take in a situation.

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1.OPEC stands for Organization of Petroleum Exporting Countries.

2. OPEC is made up of 12 countries.

3.OPEC is a cartel

4.OPEC sets oil prices since they control most of the oil supply

5. OPEC has Member-countries are in Africa, Southeast Asia, and South America.

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1.A floating exchange rate is determined by supply and demand.

2.Japanese get dollars for selling to USA.

3.The opposite of currency appreciation is currency depreciation.

4.Depreciating effects are the very opposite of appreciation

5.Currency depreciation is good for producers but bad for consumers in the same country.

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1.Free trade is international trade without government restrictions.

2.Free trade moves plans to countries where labor costs are lower.

3.A quota is a limitation on the number of units or the amount of a particular good that can be imported into a country.

4.Governments also use embargoes to impact trade.

5.Standards are another means of regulating trade.

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Consumer Price Index (CPI) average change in prices of commonly used goods and services
inflation increase in the prices of commonly used goods and services
interest rate price of money that is borrowed or saved
money supply amount of money available in the economy, including money in circulation and demand deposits
purchasing power person's ability to buy goods and services, given his or her income

1. Money supply includes money in circulation, such as the money in your wallet and money in demand deposits, such as money held in checking accounts in the bank.
2.The demand for money depends on different things, such as the number of people who want to use it to buy goods and services.
3.Remember that when consumers make purchases, goods and services are transferred from businesses to households in exchange for money.
4.Then businesses use this money to pay for productive resources—including natural, human, and capital—and to pay taxes.
5.Most countries have their own currencies, or money.

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confidence trust
contractionary policy actions intended to slow economic growth
expansionary policy actions intended to encourage (or expand) economic growth
fiscal policy when the government uses government spending and taxes to affect economic performance
monetary policy when the central bank uses money supply and interest rates to affect a country's economy

1.Remember that government spending is part of the Gross Domestic Product. 2.So, when a government spends more money, it directly increases GDP. 3.Government spending can also increase GDP in other ways.
4.For example, the government may increase spending on public works projects such as building and improving roads and bridges.
5.For these projects, people are hired to do the work. So, jobs are created.

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SKIP

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central bank a country's primary authority on areas related to money

Federal Reserve the central bank of the United States
monetary policy the influence of the central bank on the growth of the money supply
money supply currency, coins, and checking account deposits
open-market operations when a central bank buys and sells securities to influence the growth of the money supply

1.There are 172 countries or regions in the world that have central banks.
2.A central bank is the country's primary authority on areas related to money.
3.The oldest central bank is called the Sveriges Riksbank.
4.This bank is 350 years old and located in Sweden.
5.The central bank of the European Union (which consists of twenty-seven countries) is called theEuropean Bank.

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externality unintended consequence
national debt total amount of money the federal government owes
personal income tax tax paid by individuals on money they earn
property right the right to exclude others from using the good or service and the right to transfer the ownership or use the resources to others
public good something that can be used by everyone, provides benefits to more than one person at a time, and whose use cannot be restricted to only those people who have paid for it

1.In a market economy—such as that of the United States—the government provides certain kinds of goods and services.
2.It also receives revenues to pay for these products.
3.Most federal tax revenue comes from personal income taxes and payroll taxes.
4.Personal income tax is the tax paid by individuals on money they earn.
5.If you work, then you pay a part of your personal income to the government.

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GDP per capita GDP divided by the number of people living in a countr
material goods products that are bought and sold, including food, clothes, computers, and cars
standard of living comfort level that people experience from having goods and services available to them

1.Real (adjusted for price changes) GDP per capita is used to measure a country's standard of living.
2.A standard of living is a comfort level that people experience from having goods and services available to them.
3.For example, you may have a certain level of material comfort knowing that there will be food in the grocery store to feed you, medical services available in case you get sick, and stores with clothes and shoes for you to buy.
4.But you may not be so comfortable living in a country where you do not have these items available when you need them.
5.You may not feel comfortable living in a place where running water in your house is not an option, and you have to travel three miles just to obtain water for drinking, cooking, brushing your teeth, bathing, or washing clothes.

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cyclical unemployment unemployment that happens when the economy is growing slowly or shrinking
labor force people who are sixteen years old or older who are actively seeking work
unemployment number of working-age people who do not have jobs
unemployment insurance money that the government gives to unemployed people who meet certain requirements
unemployment rate percentage of the labor force that is willing and able to work, does not currently have a job, and is actively looking for work

1.You already know about the economic cycle.
2.It describes the roller-coaster behavior of the economy.
3.The roller coaster has several phases: economic growth, peak (highest point), shrinking economy, and trough (lowest point).
4.Now let's take a closer look at how unemployment (or the number of working-age people who do not have jobs) fits into the economic cycle.
5.You know that during periods of economic growth consumers are buying more goods and services.

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demand willing and able to consume
demand schedule table that shows the relationship between price and quantity demanded
supply quantity of a good or service that producers make and put in the market
supply schedule table that shows the relationship between price and quantity supplied

1.Looking at supply and demand together, you can see how many shoes will be both supplied and demanded at each price level.
2.The producer can also choose a price that will allow consumers to buy the shoes—and at which he can make a profit.
3.From the table above, you can see that any price between $50 and $200 would result in the shoes being both supplied and demanded.
4.Consumers (motivated by lower prices) would prefer a price of $50 for a pair of shoes.
5.Producers (motivated by higher prices which yield higher profits) would prefer a price of $200 for a pair of shoes.

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efficiency using resources effectively, without wasting them
equilibrium price price at which quantity supplied equals quantity demanded
shortage when buyers want to purchase more than the producers want to sell at the given price
surplus when producers want to sell more than buyers want to buy at the given price

1.Buying and sales decisions make prices and quantities move toward the equilibrium price.
2.At this price, quantity demanded equals quantity supplied.
3.In the real world, markets may not always work so smoothly.
4.There are other factors to consider, as you will learn in the next lesson.
5.But market pressures do push prices and quantities towards equilibrium.

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equilibrium point point at which the supply and demand curves intersect
equilibrium price price at which quantity supplied equals quantity demanded
excess demand more demand than needed
excess supply more supply than needed

1."excess" means that there is a greater amount of something than needed.
2.At lower price levels, there is excess demand for shoes.
3.This means that there is too much demand to equal the supply of shoes offered by sellers.
4.At higher prices, there is excess supply of shoes.
5.There is too much supply to equal the demand for shoes.

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imperfect competition when individual sellers have some control over the price of a product in a market
monopolistic competition market structure with large number of sellers who produce differentiated products
monopoly market structure with a single seller who produces a product with no close substitutes
oligopoly market structure with a few sellers who produce either identical or differentiated products
perfect competition market structure with many sellers who produce identical products

1.There is another important "opposite" with perfect competition and a monopoly: entry and exit.
2.Entry refers to new sellers coming into the market (opening new businesses), and exit refers to old firms leaving the market (closing stores or factories).
3.In a monopoly, there are barriers to entry.
4.This means that the competition is not allowed to enter the market.
5.Do you remember Thomas Edison's company that received a patent for light bulbs? This patent prevented other light bulb companies from entering the market.

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marginal cost cost of producing an extra unit of output
marginal revenue money earned from producing an extra unit of output
maximizes makes as big as possible
monopoly market structure with one single seller, who produces a good or service with no close substitutes
natural monopoly business that has large economies of scale and can make a product more efficiently than other sellers

1.Marginal is all about producing one more product.
2.Marginal cost is how much it costs to make one more product.
3.And marginal revenue is how much money you earn from making one more product.
4.A monopolist maximizes his or her profits when marginal cost equals marginal revenue.
5.In other words, a person who runs a monopoly earns the most profits when the cost of making one more product is the same as the money earned from making one more product.

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fixed cost costs that does not change as output changes
market share part of total sales held by one seller
price setter seller that determines a product's price
price taker seller that cannot affect a product's price
variable cost cost that changes as output changes

1.Hotel owners have an incentive to supply the rooms.
2.This incentive is to earn enough money to cover costs and hopefully make a profit.
3.Producers believe that providing this service and earning money will make them better off.
4.So, earning money is a reward of supplying the hotel rooms. 5.Owners also pursue this reward because of self-interest. The owners are interested in making themselves better off by earning money.

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market-clearing price price at which quantity supplied equals quantity demanded (also known as the equilibrium price)
price ceiling when a price is set below the equilibrium price and not allowed to increase
price floor when a price is set above the equilibrium price and not allowed to decrease
shortage when buyers want to purchase more than the producers want to sell at the given price
surplus when producers want to sell more than buyers want to purchase at the given price

1.Rent control means that the government sets a maximum rent.
2.Apartment owners cannot charge above this rent price.
3.For example, if the maximum rent is $500 per month, then apartment owners cannot charge above $500 to rent the apartment.
4.Between 1973 and 1981, the government also put price ceilings on gasoline.
5.Any gas station owner who tried to charge more than the price set by the government could be charged with fraud.

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inefficient using resources in a wasteful way
minimum wage lowest amount of money that an employer can pay a person for working
personal income money that a person has to buy goods and services
price control government limit on the maximum or minimum price of a good or service
rent control maximum amount that a property owner can charge a renter

1.The government sets price controls, such as price floors and price ceilings.
2.A price floor is when a price is above the equilibrium and not allowed to decrease, such as minimum wage.
3.A price ceiling is when the price is below equilibrium and not allowed to increase, such as rent control.
4. First, let's look at minimum wage, which is a kind of price floor.
5.This refers to the lowest amount of money that an employer can pay a person for working.

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U2 L2            ABC

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U2 L2            ABC

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1. A household is an individual or group of individuals that occupy a single housing unit and shares common living expenses.
2.A household might be blood-related family.
3.Not all household, have to be or are blood-related.
4.Microeconomics is the study of how these economic actors make decisions are impacted by the allocation of resources.
5.Individuals who make up households and oither businessses pay taxes to the government.

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barter to exchange goods and services without the use of money
competitor person or group that rivals another
exchange to trade, or a market where buyers and sellers interact
market place where buyers and sellers exchange goods and services
market share a company's sales divided by the total sales in the industry over a certain period of time

1.Bartering involves exchanging goods and services without the use of money.
2.It is just a straight exchange.
3.Think about a time in school when you bartered: such as bartering your lunch snack for someone else's dessert, or bartering baseball cards.
4.You probably called this trading.
5.In economics, trading often involves money, while bartering just involves goods or services.

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efficiency using resources effectively, without wasting them
equilibrium price price at which quantity supplied equals quantity demanded
shortage when buyers want to purchase more than the producers want to sell at the given price
surplus when producers want to sell more than buyers want to buy at the given price

1.At the equilibrium price, producers supply the same amount of goods and services that consumers demand.
2.This means that producers are allocating their productive resources efficiently.
3.Efficiency results from using the economy's resources effectively and not wasting them.
4.At the equilibrium price, producers use their resources to produce goods and services that consumers are able and willing to buy.
5.Producers are also able to make and sell all of their products.

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commission money earned as a percentage of sales revenue
price discrimination when producers sell identical goods or services to different buyers at different prices
salary range scope (or range) of earnings
wage discrimination when people receive different wages based on factors such as race and gender
wage structure levels of jobs and earning ranges

1.

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antitrust laws rules that prevent the creation and behavior of monopolies
legal contract agreement enforceable by law
liability legal obligation to repay a debt
property rights privileges of deciding how resources are used

1.antitrust laws try to prevent the creations of monopolies, which are companies that sell goods and services for which there are no close substitutes.
2.When Thomas Edison first invented and sold light bulbs, his company was a monopoly.
3.It was the only business that sold light bulbs.
4.Antitrust laws also try to prevent the behaviors that go along with monopolies (such as fixing high prices).
5.Think about Edison's company again.

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incentive something that motivates someone to act in a certain way
patent a grant by the government to make, use, and sell an invention for a certain amount of time
property right the right to decide how a resource is used

1.A patent is a grant by the government to make, use, and sell an invention for a certain amount of time.
2.Patents give people incentives to create new inventions.
3.In a sense, they create entrepreneurs.
4.But, they also create single sellers for a period of time.
5.These single sellers gain monetary benefits from their inventions.

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copyright sole right to publish or sell a form of artistic work
intangible something that cannot be touched
intellectual property intangible assets that result from creativity
patent sole right granted to an individual who invents a good or service
piracy stealing intellectual property

1.The government grants this right to an individual who has invented a product or service.
2. A patent allows the inventor to be the only person who can produce, use, or sell the invention for a certain time—usually up to twenty years.
3.But the inventor must share the invention with the public in order to receive the patent.
4.Patents allow people to share their inventions with the world.
5.They also reassure the inventor that he or she will profit from the invention.

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consumer person whose economic wants are satisfied by using goods and services
demand the willingness and ability of consumers to buy a good or service
fad goods and services that become popular very quickly and then lose their popularity very fast
investment something that people put their money into because they hope to make more money in the future
return money earned on an investment

1.Consumers influence how goods and services are made by choosing which goods and services to buy.
2. For example, some goods are price sensitive. 3.This means that consumers will buy fewer of them when their prices increase.
4.It also means that consumers will buy more of them when their prices decrease. Suppose a cereal goes on sale at the grocery store, and its price drops.
5.If cereal is a price-sensitive good, then more people will buy the cereal at the lower price.

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analysis in-depth study
benefit what is gained when a decision is made
condition circumstance
cost what is given up when a decision is made
maximize to receive the most from

1.The first is about considering something, and the second is about the action.
2.In the case of the math exam, thinking about your choices in a logical way was the rational thinking part.
3.Studying for the math exam would be the rational behavior part.
4.In economics, rational behavior has two parts.
5.The first part is about maximizing, or getting the most from, something. Often, this something is satisfaction, or happiness.

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accounting cost cost of producing a good or service
alternative option
monetary relating to money
opportunity cost value of the best alternative given up
retail price money value of a good or service that is charged to the customer

1.In the real world, you may pay more than a product's retail price, because of something called a sales tax.
2.This tax refers to the amount that state governments charge consumers to buy many goods and services. 3.The amount of the tax is calculated as a percentage of an item's retail price and then added to the price tag amount.
4.This percentage differs depending on the state, and not all items are subject to sales tax.
5.For example, New Hampshire does not have a sales tax, but New Jersey has a 7 percent sales tax.

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command economy economy where goods, services, and resources are distributed by the government
free market economy economy where goods, services, and resources are distributed by price
price monetary cost of an item
standard of living level of comfort that people feel when goods and services are available to them
wage amount that a person earns for working expressed in a unit of time, like $9 an hour

1.Another way to distribute scarce resources is by force.
2.Basically, the stronger take what they want from the weaker individuals.
3.It is distribution by bullying, For example, Ralph is buying a new pair of jeans.
4.He is in line to pay for them, when Jason approaches him and takes the jeans.
5.Jason is bigger and stronger than Ralph.

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collective bargaining process of negotiating work-related terms between workers' representatives and businesses
division of labor when the production of a good or service is broken down into several separate tasks, with different people performing each task
economic specialization when people concentrate their production on fewer kinds of goods and services than they consume
gross pay full amount of wages or salary that you earn
net pay gross pay minus deductions, such as income taxes and Social Security contributions

1.Human resources can be physical, such as building a road or painting a house.
2.These resources can also be mental, such as evaluating a medical patient or testing a child for special services in school.
3. People perform jobs and receive monetary compensation called wages or salaries. 4.Wages are usually calculated on an hourly, weekly, or monthly basis. 5.Salaries are usually expressed annually (or by year).

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consumer person whose needs and wants are satisfied by using goods and services
economics social science that focuses on decision making
good object that can satisfy people's needs or wants
need a good or service required for survival
producer person who makes goods or provides services

1.The United States is a consumer-oriented society because many Americans spend large portions of their paychecks to buy goods and services.
2.Cars and homes are goods.
3.When you spend money, you are a consumer.
4.You are part of a group of people who buy goods and services.
5.A large section of producers are companies.