Economics and Finance Flashcards

What is the minimum wage?

Answer: The lowest hourly wage an employer is legally permitted to pay workers

The minimum wage is the lowest legal hourly rate employers can pay workers, set by federal law under the Fair Labor Standards Act, though states and cities can set higher rates.

What does 'interest rate' mean in the context of a loan?

Answer: The percentage of the loan principal charged as a fee for borrowing money over a period of time

An interest rate is the cost of borrowing money, expressed as a percentage of the loan amount, paid by the borrower to the lender over the loan term.

What is a 401(k) plan?

Answer: An employer-sponsored retirement savings account that offers tax advantages

A 401(k) is an employer-sponsored retirement savings plan that allows workers to contribute pre-tax earnings, often with employer matching contributions, and lets investments grow tax-deferred until retirement.

What is the purpose of federal income tax?

Answer: To generate revenue for the federal government to fund public services, infrastructure, and social programs

Federal income tax is a levy on earnings collected by the IRS to fund government operations, including national defense, Social Security, Medicare, infrastructure, and public services.

What is a trade deficit?

Answer: When a country imports more goods and services than it exports, resulting in a net outflow of currency

A trade deficit occurs when the value of a country's imports exceeds the value of its exports, meaning more money flows out of the country than flows in from trade.

What is the purpose of a W-2 form in the United States?

Answer: To report an employee's annual wages and the amount of taxes withheld by an employer

A W-2 is an IRS form that employers must send to each employee and to the IRS annually, reporting the employee's wages and the amount of federal, state, and other taxes withheld.