Series 65 Topic Exam – Economic Concepts

🧾 Series 65 Topic Exam – Economic Concepts
📘 Sharpen Your Knowledge on Macroeconomics, Interest Rates, and Market Indicators

This Series 65 topic quiz focuses on economic concepts, including supply & demand, monetary and fiscal policy, economic indicators, interest rate movements, and business cycles. These topics are highly testable on the Series 65 and form the foundation for understanding investment strategy.

✅ Instructions:

• Total questions: 10
• Suggested time: 12–15 minutes
• Passing score: 70% (7 out of 10)

🔢 Economic Concepts Quiz

1. What typically happens during the expansion phase of the business cycle?

A) GDP contracts, unemployment rises, inflation falls
B) Interest rates fall and consumer demand shrinks
C) Corporate profits rise, unemployment falls, GDP increases
D) Government spending is reduced to slow the economy

2. Which of the following is considered a leading economic indicator?

A) Gross Domestic Product (GDP)
B) Unemployment rate
C) Consumer Price Index (CPI)
D) Building permits

3. What is the primary tool used by the Federal Reserve to implement monetary policy?

A) Tax policy
B) Government spending
C) Open market operations
D) Treasury bond issuance

4. If the Federal Reserve wants to slow down inflation, it would most likely:

A) Buy Treasury securities in the open market
B) Lower the reserve requirement
C) Raise the discount rate
D) Increase government spending

5. What type of policy is government taxation and spending?

A) Supply-side
B) Fiscal
C) Monetary
D) Structural

6. What describes an inverted yield curve?

A) Short-term rates are lower than long-term rates
B) Short-term rates are higher than long-term rates
C) Bond yields rise with credit quality
D) Municipal bonds yield more than Treasury bonds

7. Stagflation refers to which economic condition?

A) Rapid GDP growth with stable inflation
B) High inflation and high unemployment
C) Low interest rates with rising GDP
D) Low inflation with high consumer spending

8. What effect does an increase in interest rates typically have on bond prices?

A) Bond prices increase
B) Bond prices remain unchanged
C) Bond prices decrease
D) Bond prices are unaffected in the short term

9. What is the role of the Consumer Price Index (CPI)?

A) Measures changes in gross national product
B) Tracks the price of raw materials
C) Measures inflation based on consumer goods and services
D) Indicates trends in manufacturing production

10. If the U.S. dollar strengthens compared to other currencies, what is a likely result?

A) U.S. exports increase
B) Imports become more expensive for U.S. consumers
C) Foreign goods become cheaper in the U.S.
D) U.S. companies see higher revenue from overseas sales

🧠 Answer Key with Explanations

1. ✅ C – Expansion includes rising GDP, falling unemployment, and improving profits.
2. ✅ D – Building permits are a leading indicator; they signal future activity.
3. ✅ C – The Fed uses open market operations (buying/selling Treasuries) to manage money supply.
4. ✅ C – Raising the discount rate discourages borrowing, reducing inflation pressure.
5. ✅ B – Fiscal policy includes government spending and taxation.
6. ✅ B – An inverted yield curve means short-term rates are higher than long-term—often a recession signal.
7. ✅ B – Stagflation = high inflation + high unemployment, rare but serious.
8. ✅ C – Interest rates and bond prices move inversely.
9. ✅ C – CPI tracks consumer goods/services prices = inflation measure.
10. ✅ C – A stronger dollar = cheaper imports, more expensive exports.

📊 Scoring Breakdown:

• 9–10 correct: Excellent. You’re ready for advanced practice.
• 7–8 correct: Solid. Review weak spots.
• 5–6 correct: Reinforce key macroeconomic concepts.
• <5 correct: Focus on foundational economic principles.

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Stay sharp. Understand the economy. Pass with confidence.