# Economics.  What is a budget?  managing one’s income and expenses by creating a plan  What is income?  earnings or payment received for resources.

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Economics

 What is a budget?  managing one’s income and expenses by creating a plan  What is income?  earnings or payment received for resources provided, such as labor  What are expenses?  costs incurred or the spending of money

 Why do you think there were blocks on the road that said, “Friend’s Birthday Party Gift. Move back on block,” “Flat tire repair. Move back one block,” “Movie tickets increase in price. Move back one block.”?  Even savvy spenders/savers like Jet Stream have unexpected expenses.

» the part of a person’s income that is not spent or used to pay taxes

» an account in which no interest is paid on the principal – » also called a zero-interest account

» the original amount of money deposited or invested, excluding any interest or dividends

» the price of using someone else’s money

» Interest computed on the sum of the original principal and accrued (accumulated) interest

» Principal = \$1,000 » Interest Rate = 5% » Interest paid semiannually » Step 1: Convert annual interest rate (5%) to decimal (.05)

» Principal = \$1,000 » Interest Rate = 5% » Interest paid semiannually » Step 2: Divide annual interest rate (stated as decimal) by two to change it to semiannual. (.05/2=.025)

» Principal = \$1,000 » Interest Rate = 5% » Interest paid semiannually » Step 3: Multiply the principal by the interest rate to get the interest paid in dollars. » (\$1,000 x.025=\$25.00)

» Principal = \$1,000 » Interest Rate = 5% » Interest paid semiannually » Step 4: Add principal and interest to get new amount of principal. » (\$1,000 + \$25.00=\$1,025)

» Principal = \$1,000 » Interest Rate = 5% » Interest paid semiannually » Step 5: Record new level of principal and repeat the process from Step 3.

» What is a non-interest bearing account? ˃an account or deposit that does not pay interest on the principal » What could Maria have bought with the \$50.62 of interest she might have earned on her savings? » Would you classify Maria as a saver or a savvy saver? ˃Savy » Why? ˃She didn’t save her money in a way that would giver her a return on her investment, i.e. an account that pays interest on the principal

» Why would anyone leave the \$1,000 in a non- interest bearing account rather than putting it in an interest-bearing account? ˃He or she may not understand the importance of compound interest or may be financially lazy. » Imagine that instead of \$1,000, Maria’s grandmother had given her \$10,000. After three years, how much interest would \$10,000 have earned on a 5 percent compounded semiannually account? ˃\$1597.10

» Why is time, i.e., the number of months you have your money in an interest-bearing account, a very important factor in accumulating savings? ˃The sooner you start saving, the sooner you start earning interest not only on your principal but also on accrued interest. Money works for you over time.

» Contract a legally binding exchange or promise or agreement between parties that is enforced by law » Key Elements of a Contract: » Competent PartiesIndividuals involved in the contract must be able to understand the conditions of the contract. » ConsiderationParties in the contract give up something in exchange for what they receive. » Mutual AgreementAll parties to the contract must agree on the terms.

» What consideration might a professional athlete give a team owner? ˃his or her skills or abilities, performance for that team, not signing with any other team » What consideration might a team owner give a professional athlete? ˃salary, length of contract, performance bonuses

» Describe some essential details of a contract you might have with your parents to mow the lawn every two weeks. ˃how much you are going to be paid ˃in addition to cutting the grass, what else must be done to complete the job » What conditions might make a contract void? ˃one of the parties is mentally impaired and does not understand the conditions of the contract ˃one of the parties is a minor ˃the contract involves an illegal act

» Rent-to-Own Contract - a basic lease contract with an option to purchase » immediate delivery » no down-payment or credit check » no penalty for returning items (with conditions) » rental-purchase agreement

» rent by the week or month » make all payments - it's yours » miss a payment - it's theirs

» Annual percentage rate (APR) is the percentage cost of credit on an annual basis.

» How does the competent parties element factor into a rent-to-own agreement? ˃The individuals involved must understand the conditions of the contract. ˃The store may not initiate a contract with someone who is mentally impaired.

» What considerations are given by each party in a rent-to-own contract? ˃The renter agrees to make payments to the store. ˃The store agrees to provide the good. ˃The renter agrees that the good may be repossessed by the store if the renter fails to make payments. ˃The store agrees that the renter may return the item without penalty after a specified amount of time.

» How is mutual agreement illustrated in a rent- to-own contract? ˃Often the store provides a written contract. ˃It is the responsibility of the renter to read the contract carefully in order to understand the terms prior to signing the contract.

» What is a contract? ˃a legally binding exchange of promises or agreements between parties enforceable by law » What are the key elements of a contract? ˃competent parties, consideration and mutual agreement » What is a rent to own contract? ˃a basic lease contract with an option to purchase

» Why is purchasing a good with a rent-to-own contract more expensive that buying the item outright? ˃Payments are spread out over a period of time – usually 12 months – and additional fees may be attached. ˃RTO stores incur the risk of repossessing the merchandise and repairing or replacing the merchandise.

» Instructions for Producing Name Tents » Fold the piece of construction paper in half, shorter edges (8 1/2") together. Crease the center fold. The folded paper should measure 8 1/2" x 5 1/2".

» Open the page to 8 1/2" x 11". » Fold the bottom 8 1/2" edge to the middle crease. Crease the fold. » Open the page to 8 1/2" x 11". » Fold the top 8 1/2" edge to the middle crease. Crease the fold. » The paper should now have four sections each measuring approximately 2 3/4" x 8 1/2".

» Starting from one end of the paper, count down three rectangles. Print your name in large letters in the rectangle. » Turn the paper upside-down. Again count down three rectangles and print your first name in large letters in the rectangle. » Fold the paper to create a tent with the name displayed on both sides.

» Group 1: Each of you will remain seated to produce your own name tent, using only one hand, your non-dominant hand - that is, the hand with which you do not write - to produce the name tent. You must keep your dominant hand behind your back. You may not assist one another.

» Group 2: Each of you will remain seated to produce your own name tent, using only one hand, your dominant hand - that is, the hand with which you write - to produce the name tent. You must keep your non-dominant hand behind your back. You may not assist one another.

» Group 3: Each of you will remain seated to produce your own name tent, using both hands. You may not assist one another.

» Group 4: Each of you will produce your own name tent while standing and using only one hand - the non-dominant hand - to produce the name tent. You must keep your dominant hand behind your back. You may not use the desk, table or chair. You may not assist one another.

» None of the groups may begin producing name tents until the class is told to begin. » When each student finishes folding his or her name tent, he or she should raise a hand. » Students will be timed and will have a maximum of two minutes to make the name tent.

» Human Capital -the knowledge, talent and skills that people possess » Investment in - efforts to acquire and improve Human Capital

» According to the U.S. Census Bureau News, March 15, 2007: » Adults with advanced degrees earn four times more than high school dropouts. » Adults with a master's, professional or doctoral degrees earned an average of \$79,946 annually, while those with less than a high school diploma earned \$19,915.

» Adults with a bachelor's degree earned an average of \$54,689 in 2005, while those with a high school diploma earned \$29,448. » In 2006, 86 percent of all adults 25 years old and older reported that they had completed at least high school. » 28 percent of adults 25 years old and older had attained at least a bachelor's degree.

» What is Human Capital? ˃the knowledge, talent and skills that people have » What is investment in human capital? ˃efforts to acquire and improve human capital » How do human invest in human capital? ˃education, training and practice » In general, how does investment in human capital – through education – affect income? ˃The more education, the greater income people earn.

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