STC SERIES 66 COMPLETE EXAM QUESTIONS AND 100%
VERIFIED ANSWERS (PASS GUARANTEED)
1. What is the primary purpose of the Federal Reserve's discount rate?
ANSWER : The discount rate is the interest rate the Federal Reserve charges
member banks for short-term loans. It's a monetary policy tool used to influence
the money supply and economic activity.
2. What does GDP measure? ANSWER : Gross Domestic Product (GDP)
measures the total value of all goods and services produced within a country's
borders during a specific period, typically annually or quarterly.
3. What is the Consumer Price Index (CPI)? ANSWER : The CPI measures
the average change over time in prices paid by consumers for a basket of goods
and services. It's the most widely used measure of inflation.
4. What characterizes a recession? ANSWER : A recession is typically
defined as two consecutive quarters of negative GDP growth, accompanied by
rising unemployment, decreased consumer spending, and reduced industrial
production.
5. What is the velocity of money? ANSWER : The velocity of money
measures how frequently a unit of currency circulates through the economy. It's
calculated by dividing nominal GDP by the money supply.
6. What are leading economic indicators? ANSWER : Leading indicators are
statistics that tend to change before the economy changes, such as stock market
performance, building permits, consumer confidence, and manufacturers' new
orders.
7. What are lagging economic indicators? ANSWER : Lagging indicators
confirm long-term trends but change after the economy has begun following a
particular pattern, such as unemployment rates, corporate profits, and labor cost
per unit of output.
,8. What is fiscal policy? ANSWER : Fiscal policy refers to government
decisions regarding taxation and spending to influence economic conditions,
including aggregate demand, employment, and inflation.
9. What is monetary policy? ANSWER : Monetary policy consists of actions
by a central bank (like the Federal Reserve) to manage the money supply and
interest rates to achieve macroeconomic objectives like controlling inflation and
stabilizing currency.
10. What are open market operations? ANSWER : Open market operations
involve the Federal Reserve buying or selling government securities to control
the money supply. Buying securities increases money supply; selling decreases
it.
11. What is the reserve requirement? ANSWER : The reserve requirement is
the percentage of deposits that banks must hold in reserve and cannot loan out.
The Fed can adjust this to influence the money supply.
12. What is deflation? ANSWER : Deflation is a general decline in prices for
goods and services, typically associated with a contraction in the money supply
and credit. It can lead to decreased economic activity.
13. What is stagflation? ANSWER : Stagflation is an economic condition
characterized by slow economic growth and high unemployment (stagnation)
occurring simultaneously with rising prices (inflation).
14. What is the yield curve? ANSWER : The yield curve is a graph showing
the relationship between bond yields and their maturities. A normal curve slopes
upward; an inverted curve (short-term rates higher than long-term) may predict
recession.
15. What is the business cycle? ANSWER : The business cycle consists of
four phases: expansion (growth), peak (maximum activity), contraction
(declining activity), and trough (minimum activity), then repeating.
16. What is expansionary fiscal policy? ANSWER : Expansionary fiscal
policy involves increasing government spending and/or decreasing taxes to
stimulate economic growth during recessions.
17. What is contractionary fiscal policy? ANSWER : Contractionary fiscal
policy involves decreasing government spending and/or increasing taxes to slow
economic growth and control inflation.
18. What is quantitative easing? ANSWER : Quantitative easing is an
unconventional monetary policy where a central bank purchases government
, securities or other securities to increase the money supply and encourage
lending and investment.
19. What is the Producer Price Index (PPI)? ANSWER : The PPI measures
the average change over time in selling prices received by domestic producers
for their output. It often predicts changes in the CPI.
20. What is aggregate demand? ANSWER : Aggregate demand is the total
demand for goods and services in an economy at a given price level and time
period, consisting of consumer spending, investment, government spending, and
net exports.
21. What is the multiplier effect? ANSWER : The multiplier effect describes
how an initial change in spending leads to a larger change in national income, as
money circulates through the economy multiple times.
22. What are coincident indicators? ANSWER : Coincident indicators
change at approximately the same time as the overall economy, such as GDP,
industrial production, personal income, and manufacturing/trade sales.
23. What is the federal funds rate? ANSWER : The federal funds rate is the
interest rate at which banks lend reserve balances to other banks overnight. It's
the Fed's primary tool for implementing monetary policy.
24. What is crowding out? ANSWER : Crowding out occurs when increased
government borrowing leads to higher interest rates, which reduces private
sector investment and consumption.
25. What is purchasing power? ANSWER : Purchasing power is the value of
currency expressed in terms of the amount of goods or services one unit of
money can buy. Inflation decreases purchasing power.
26. What is M1 money supply? ANSWER : M1 includes the most liquid
forms of money: physical currency, demand deposits, traveler's checks, and
other checkable deposits.
27. What is M2 money supply? ANSWER : M2 includes M1 plus savings
deposits, money market mutual funds, and small-denomination time deposits
(under $100,000).
28. What is the prime rate? ANSWER : The prime rate is the interest rate
commercial banks charge their most creditworthy customers, typically large
corporations. It serves as a benchmark for other loan rates.
VERIFIED ANSWERS (PASS GUARANTEED)
1. What is the primary purpose of the Federal Reserve's discount rate?
ANSWER : The discount rate is the interest rate the Federal Reserve charges
member banks for short-term loans. It's a monetary policy tool used to influence
the money supply and economic activity.
2. What does GDP measure? ANSWER : Gross Domestic Product (GDP)
measures the total value of all goods and services produced within a country's
borders during a specific period, typically annually or quarterly.
3. What is the Consumer Price Index (CPI)? ANSWER : The CPI measures
the average change over time in prices paid by consumers for a basket of goods
and services. It's the most widely used measure of inflation.
4. What characterizes a recession? ANSWER : A recession is typically
defined as two consecutive quarters of negative GDP growth, accompanied by
rising unemployment, decreased consumer spending, and reduced industrial
production.
5. What is the velocity of money? ANSWER : The velocity of money
measures how frequently a unit of currency circulates through the economy. It's
calculated by dividing nominal GDP by the money supply.
6. What are leading economic indicators? ANSWER : Leading indicators are
statistics that tend to change before the economy changes, such as stock market
performance, building permits, consumer confidence, and manufacturers' new
orders.
7. What are lagging economic indicators? ANSWER : Lagging indicators
confirm long-term trends but change after the economy has begun following a
particular pattern, such as unemployment rates, corporate profits, and labor cost
per unit of output.
,8. What is fiscal policy? ANSWER : Fiscal policy refers to government
decisions regarding taxation and spending to influence economic conditions,
including aggregate demand, employment, and inflation.
9. What is monetary policy? ANSWER : Monetary policy consists of actions
by a central bank (like the Federal Reserve) to manage the money supply and
interest rates to achieve macroeconomic objectives like controlling inflation and
stabilizing currency.
10. What are open market operations? ANSWER : Open market operations
involve the Federal Reserve buying or selling government securities to control
the money supply. Buying securities increases money supply; selling decreases
it.
11. What is the reserve requirement? ANSWER : The reserve requirement is
the percentage of deposits that banks must hold in reserve and cannot loan out.
The Fed can adjust this to influence the money supply.
12. What is deflation? ANSWER : Deflation is a general decline in prices for
goods and services, typically associated with a contraction in the money supply
and credit. It can lead to decreased economic activity.
13. What is stagflation? ANSWER : Stagflation is an economic condition
characterized by slow economic growth and high unemployment (stagnation)
occurring simultaneously with rising prices (inflation).
14. What is the yield curve? ANSWER : The yield curve is a graph showing
the relationship between bond yields and their maturities. A normal curve slopes
upward; an inverted curve (short-term rates higher than long-term) may predict
recession.
15. What is the business cycle? ANSWER : The business cycle consists of
four phases: expansion (growth), peak (maximum activity), contraction
(declining activity), and trough (minimum activity), then repeating.
16. What is expansionary fiscal policy? ANSWER : Expansionary fiscal
policy involves increasing government spending and/or decreasing taxes to
stimulate economic growth during recessions.
17. What is contractionary fiscal policy? ANSWER : Contractionary fiscal
policy involves decreasing government spending and/or increasing taxes to slow
economic growth and control inflation.
18. What is quantitative easing? ANSWER : Quantitative easing is an
unconventional monetary policy where a central bank purchases government
, securities or other securities to increase the money supply and encourage
lending and investment.
19. What is the Producer Price Index (PPI)? ANSWER : The PPI measures
the average change over time in selling prices received by domestic producers
for their output. It often predicts changes in the CPI.
20. What is aggregate demand? ANSWER : Aggregate demand is the total
demand for goods and services in an economy at a given price level and time
period, consisting of consumer spending, investment, government spending, and
net exports.
21. What is the multiplier effect? ANSWER : The multiplier effect describes
how an initial change in spending leads to a larger change in national income, as
money circulates through the economy multiple times.
22. What are coincident indicators? ANSWER : Coincident indicators
change at approximately the same time as the overall economy, such as GDP,
industrial production, personal income, and manufacturing/trade sales.
23. What is the federal funds rate? ANSWER : The federal funds rate is the
interest rate at which banks lend reserve balances to other banks overnight. It's
the Fed's primary tool for implementing monetary policy.
24. What is crowding out? ANSWER : Crowding out occurs when increased
government borrowing leads to higher interest rates, which reduces private
sector investment and consumption.
25. What is purchasing power? ANSWER : Purchasing power is the value of
currency expressed in terms of the amount of goods or services one unit of
money can buy. Inflation decreases purchasing power.
26. What is M1 money supply? ANSWER : M1 includes the most liquid
forms of money: physical currency, demand deposits, traveler's checks, and
other checkable deposits.
27. What is M2 money supply? ANSWER : M2 includes M1 plus savings
deposits, money market mutual funds, and small-denomination time deposits
(under $100,000).
28. What is the prime rate? ANSWER : The prime rate is the interest rate
commercial banks charge their most creditworthy customers, typically large
corporations. It serves as a benchmark for other loan rates.
