economy chapter 9 section 1

Cards (15)

  • Spending
    Consumption of disposable income
  • Saving
    Non-consumption of disposable income
  • Spending and saving are equally important to a strong economy
  • Reasons people save money
    • Major purchases
    • Pay large annual or semiannual bills
    • Unexpected expenses
    • Major long-term expenses
    • Amass wealth or leave an inheritance
  • There are 2 types of security
    • Money in a bank account cannot be lost due to misfortunes at home
    • Most financial institutions are protected by state and federal deposit insurance
  • Interest
    Payment received when depositing money in a financial institution in exchange for the use of your money
  • Regular Savings Accounts
    • Require only a small deposit
    • May charge a fee if the balance drops below a specified level
    • Offer high liquidity but low interest rates
  • Money Market Deposit Accounts
    • Offer variable interest rates that are higher than regular savings accounts
    • Have a fair amount of liquidity but may restrict the number of withdrawals per month
    • Financial institutions may place other restrictions on these accounts
  • Time Deposits
    • Require the saver to leave money in the account for a specific amount of time
    • Savers will typically buy certificates of deposit or savings bonds
  • Savings Bonds
    • Issued by the federal government to pay for federal programs
  • Savings Rate
    The percentage of people's disposable income that is not spent
  • When asked about the benefits of saving money
    People gain security and interest
  • Comparing savings accounts and time deposits
    In a regular savings account you can withdraw the money any time, while time deposits require the saver to leave the money in the account for a specific amount of time
  • How economists measure savings
    Through the savings rate, which is the percentage of people's disposable income that is not spent
  • Maturity
    the length of time that money must be deposited