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34 Cards in this Set
- Front
- Back
expansion
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the phase of the economic cycle when levels of employment and production are high and the economy is growing, generally accompanied by rising prices for goods and services
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recession
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the phase of the economic cycle when leveles of eomployment and production fall and growth of the economy slows
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depression
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the phase of the economic cycle when levels of employment and production are low and economic growth is at a virtual standstill
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recovery
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the phase of the economic cycle when levels of eomployment and production are improving and the economy is growing
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gross domestic product (gdp)
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the total of all goods and services produced in a country; used to monitor economic growth
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inflation
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a state of the economy in which the general price level is increasing
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real property
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tangible assets that are immovable, land and anything fixed to it such as a house
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personal property
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tangible assets that are movable and used in every day life
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fair market value
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the actual value of an asset or the price that it can reasonably be expected to sell for in the open market
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liabilities
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debts, such as credit card charges, loans and mortgages
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current (short term) liability
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any debt due within 1 year of the date of the balance sheet
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long term liability
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any debt due 1 year or more from the date of the balance sheet
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net worth
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an individual's or family's actual wealth; determined by subtracting total liabilities from total assets
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equity
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the actual ownership interest in a specific asset or group of assets
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fixed expenses
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contractual, predetermined expenses involving equal payments each period such as mortgage and installment loan payments, insurance
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variable expenses
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expenses involving payment amounts that change from one time period to the next, such as food, clothing, utilities, entertainment, medical
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cash surplus
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an excess amount of income over expenses that results in increased net worth. use it for savings or investments, acquire assets or reduce debt
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cash deficit
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an excess amount of expenses over income, resulting in insufficient funds as well as in decreased net worth.
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rule of 72
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a useful formula for estimating about how long it will take to double a sum at a given interest rate. # of yrs to double=72/annual compound interest rate
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progressive tax structure
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a tax structure in which the larger the amount of taxable income the higher the rate at which it is taxed
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marginal tax rate
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the tax rate you pay on the next dollar of taxable income
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average tax rate
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the rate at which each dollar of taxable income is taxede on average; calculated by dividing the tax liablility by taxable income
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filing status
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single taxpayers, married filing jointly, married filing separately, head of household, qualifying widow or widower with dependent child
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federal withholding taxes
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taxes- based on the level of earnings and the number of withholding allowances claimed-an employer deducts from the employee's gross earning each pay period
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federal insurance contributions act (FICA) or social security tax
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the law establishing the combined old-age, survivors's, disability, and hospital insurance tax levied on both employer and employee
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taxable income
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the amount of income subject to taxes; it is calculated by subracting adjustments, the larger of itemized or standard deductions, and exemptions from gross income
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gross income
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the total of all of a taxpayer's income (before any adjustments, deductions, or exemptions) subject to federal taxes; it includes active, portfolio, and passive income
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three kinds of income
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active - income earned on the job, portfolio- earnings generated from most investment holdings; including savings accounts, stocks bonds. passive - income derived from real estate, limited partnerships, and other forms of tax shelters
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capital gains
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occurs whenever an asset (such as stock, bond, real estate) is sold for more than its original cost
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adjustments to gross income
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allowable deductions from gross income, including certain employee, personal retirement, insurance, and support expenses
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adjusted gross income (AGI)
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the amount of income remaining after subtracting all allowable adjustments to income from gross income
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itemized deductions
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personal expenditures that can be deducted from AGI when determining taxable income
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tax credits
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deductions from a taxpayer's tax liability that directly reduce hi taxes due rather than taxable income. ex: credit for elderly or disabled, foreign tax credit, credit for prior year minimum tax, mortgage interest credit, credit for qualified electric vehicle
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exemptions
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deductions from AGI based on the number of persons supported by the taxpayer's income
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