FFM Latest Exam Study Guide with
Complete Solutions 2025
GDP - ANSWER broadest measure of economic health of the nation. how
much economic activity has happened within US borders
Countercyclic economic indicator - ANSWER moves in opposite direction of economy.
ex: unemployment rate
Leading economic indicators - ANSWER change before economy changes. predict
future. ex: stock market, home prices, s+p 500 stock index
Consumer confidence index - ANSWER shows how consumers feel about the
economy and their personal finances
Index of leading economic indicators (LEI) - ANSWER suggests futures direction
of economy
Inflation - ANSWER steady rise in general level of prices. changing cost over time
of "market basket" for typical household
Stagflation - ANSWER stagnant economic growth and high unemployment with
rising prices
Consumer price index (CPI) - ANSWER how inflation is measured
Real income - ANSWER measured in constant prices relative to some base time period
, Nominal income - ANSWER money income
Purchasing power - ANSWER measure of goods and services that one's income will buy
Rule of 70 - ANSWER how long it will take for value of the dollar to go down by
1/2. Divide 70 by current inflation rate (ex. 70/2.1 = 33 years)
Personal inflation rate - ANSWER rate of increase in prices of items purchased by
a particular person
Deflation - ANSWER broad, sustained decline in prices of goods and services
Fed - ANSWER federal reserve board.
promotes maximum employment and price stability, sets federal funds rate (rates
banks charge each other). if economy is growing too fast, fed raises federal funds rate
to increase borrowing costs in an effort to reduce borrowing --> slow growth to stabilize
economy
Federal funds rate - ANSWER short-term rate at which banks lend to other banks
Interest - ANSWER price of money
What shows economic outlook for US - ANSWER jobs, housing sales,
consumer spending, business spending, inflation, stock market
Opportunity cost - ANSWER value of next best alternative that must be forgone
Complete Solutions 2025
GDP - ANSWER broadest measure of economic health of the nation. how
much economic activity has happened within US borders
Countercyclic economic indicator - ANSWER moves in opposite direction of economy.
ex: unemployment rate
Leading economic indicators - ANSWER change before economy changes. predict
future. ex: stock market, home prices, s+p 500 stock index
Consumer confidence index - ANSWER shows how consumers feel about the
economy and their personal finances
Index of leading economic indicators (LEI) - ANSWER suggests futures direction
of economy
Inflation - ANSWER steady rise in general level of prices. changing cost over time
of "market basket" for typical household
Stagflation - ANSWER stagnant economic growth and high unemployment with
rising prices
Consumer price index (CPI) - ANSWER how inflation is measured
Real income - ANSWER measured in constant prices relative to some base time period
, Nominal income - ANSWER money income
Purchasing power - ANSWER measure of goods and services that one's income will buy
Rule of 70 - ANSWER how long it will take for value of the dollar to go down by
1/2. Divide 70 by current inflation rate (ex. 70/2.1 = 33 years)
Personal inflation rate - ANSWER rate of increase in prices of items purchased by
a particular person
Deflation - ANSWER broad, sustained decline in prices of goods and services
Fed - ANSWER federal reserve board.
promotes maximum employment and price stability, sets federal funds rate (rates
banks charge each other). if economy is growing too fast, fed raises federal funds rate
to increase borrowing costs in an effort to reduce borrowing --> slow growth to stabilize
economy
Federal funds rate - ANSWER short-term rate at which banks lend to other banks
Interest - ANSWER price of money
What shows economic outlook for US - ANSWER jobs, housing sales,
consumer spending, business spending, inflation, stock market
Opportunity cost - ANSWER value of next best alternative that must be forgone
