Economics and Personal Finance Flashcards

What does the term 'opportunity cost' mean in economics?

Answer: The value of the next best alternative foregone

Opportunity cost is the value of the next best option you give up when making a choice.

Which of the following best describes a 'budget surplus'?

Answer: Income exceeds spending

A budget surplus occurs when revenue or income is greater than expenditures during a given period.

What is the primary function of the Federal Reserve in the United States?

Answer: Manage the nation's monetary policy

The Federal Reserve manages monetary policy, including controlling the money supply and setting interest rates.

What is 'inflation'?

Answer: A general rise in price levels over time

Inflation refers to the sustained increase in the general price level of goods and services in an economy.

Which financial document shows a person's assets, liabilities, and net worth at a specific point in time?

Answer: Balance sheet (net worth statement)

A personal balance sheet, or net worth statement, captures assets minus liabilities to show financial health at a given date.

What is a 'credit score' primarily used for?

Answer: Assessing an individual's creditworthiness

A credit score reflects a person's credit history and is used by lenders to evaluate the risk of extending credit.