Inflation is a rise in general price levels that causes the value of your money to decrease. In other words, if you can buy a bag of groceries for $25, inflation is when that same bag now costs $35.
Archive for the ‘Level 1’ Category
Inflation is…
Tuesday, June 9th, 2009What does it mean when they say your donation is tax deductible?
Tuesday, June 9th, 2009Philanthropy can do more than just aid a worthy cause; in certain situations, generosity can reward the giver as well. Giving to charity can actually reduce the taxes you have to pay, but there are special conditions that have to be met first.
When you donate to charity, you’re spending money, right? So no matter how much money you make, you now have less of it to use. But even though donating to charity means you’re using your own money in a way you choose, you’re not using it to buy new things for yourself, you’re using it to benefit a worthy cause. As long as you donate the money to a qualified recipient – a person or organization the government trusts to use that money effectively – you have the right to be rewarded for using your own wealth to help others. So your donation becomes tax deductible, which means you have a lower adjusted net income.
To put it simply, when you donate to charity, you’re really getting two benefits at once: you’re helping your chosen organization and you’re also reducing your own income taxes.
Why do customer service calls connect you to India?
Friday, June 5th, 2009Chances are if you’ve called a large company to ask them to help you with your phone, computer, or pretty much anything, you have talked to someone in India. Not just anyone, but a trained professional who can help you through your problem.
Companies from all over the world outsource their call centers to India and other countries because a strong portion of the educated class there speaks English and the workers do not require as much in wages as call center operators in America. The economic theory behind the difference in wages is called comparative advantage, which is when one provider can produce something more efficiently than another provider. In this example, Indian call centers have a comparative advantage because they can pay their workers less than American call centers can.
So what’s the easy answer? Companies contract with Indian call centers simply because it’s cheaper. And if they can lower their operational expenses without lowering their income, it adds up to more profit for company shareholders.
A Merger is…
Friday, June 5th, 2009A merger is the combining of two or more companies to become one. It’s basically when one company marries another company and decides to move in. They take the same name and put their money in a joint account (aka combine balance sheets).
A Markdown (Price Markdown) is…
Friday, June 5th, 2009A price markdown is the reduction, or lowering, of the original selling price of a product. A price markdown is a lot like a retail sale – “50% off all Ferraris this month only!”
A Ponzi Scheme is…
Friday, May 15th, 2009A Ponzi scheme (named after Charles Ponzi) is an investment scam that promises investors high returns that aren’t actually real profits. Instead, each time a new investor signs on with the money manager, he uses their new funds to pay the high ‘returns’ to his older clients. Ponzi schemes fall apart because the manager eventually will fail to find new clients or regulators catch on – it’s generally just a matter of when.
Deflation is…
Friday, May 15th, 2009Deflation occurs when an entire economy of people stop buying as much as they once did, forcing the price of goods to drop. In numbers, an economy enters a state of deflation once the inflation rate (normally 3%) drops below zero.
A Fiscal Year is…
Friday, May 1st, 2009A fiscal year is any 12-month period used by businesses for accounting purposes, usually divided into four 3-month-long quarters. A fiscal year can begin in any month, not necessarily January (e.g. October 1, 2008-September 30, 2009).
Diversification is…
Saturday, April 25th, 2009Diversification is a way to reduce risk by creating a portfolio with a wide mixture of different investments. In basic terms, it means “don’t put all your eggs in one basket.”