Economy for Traders Quiz: Rates, Policy and Deficits

Check how policy and the economy reach your positions: real rate arithmetic, how a statement is read, what a rate change does to margin interest, deal spreads, tariffs and who dates a recession.

AI-assisted, reviewed by Ryza Glorioso →

Questions: 10
Level: Intermediate
Time: 5 min

Question 1 of 10

1A hypothetical account of cash earns a nominal 6% over a year while inflation runs at 4%. Using the exact formula, what is the real return?

A About 1.92% B Exactly 2.00% C About 10.24% D About 1.50%

2The central bank holds its policy rate at a meeting where the market had widely expected a cut. How is that decision most likely to be read?

A Dovish, because rates did not go up B Neutral, because the rate did not change C Hawkish, because policy is tighter than expected D Dovish, because a hold always supports growth

3You normally risk 450 per trade with a stop 1.50 below entry. Before a rate decision you widen the stop to 3.00 below entry. How many shares keep the dollar risk at 450?

A 300 B 150 C 75 D 450

4After a benchmark rate move, your broker's rate on your 24,000 margin debit goes from 8% to 9.5%. Using a 360-day count, how much more interest do you pay in a 30-day month?

A About 360 B About 1.00 C About 190 D About 30

5Which form of the efficient market hypothesis says past prices and volume are already in the price, ruling out profits from chart patterns alone?

A The weak form B The semi-strong form C The strong form D None of them, since all three allow it

6A larger deficit means the US Treasury must sell more debt at auction. Other things equal, what does that extra supply tend to do?

A Force yields up, since supply always decides where yields go B Push yields down, since more bonds bring more liquidity C Push yields up to attract buyers, though other forces can outweigh it D Push stock prices up, since money must leave bonds

7What does the US debt ceiling limit?

A The total spending Congress may approve in one budget B The size of each individual Treasury auction C The deficit the government may run in a single year D The total debt the federal government may have outstanding

8A target has a hypothetical cash offer of 64 and trades at 60. If the deal fails, you assume it falls to 44. Ignoring time and costs, what chance of closing does 60 imply?

A About 67% B About 80% C About 94% D About 25%

9An importer sells a product for 200. Imported goods cost 120 and other costs 50. A 10% tariff hits the imports and the company passes all of it on in its price. What is the new operating margin?

A About 14.2% B 15.0% C 9.0% D About 11.7%

10Who sets the official dates of US recessions, and when do those dates usually arrive?

A The Federal Reserve, at the meeting where a downturn begins B The Treasury, as soon as quarterly output data show a fall C The NBER's dating committee, often many months after the turn D The Bureau of Labor Statistics, in its next monthly jobs report

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