DSST Money and Banking study guide
DSST Money and Banking · Work through your exam, one topic at a time.
The DSST Money and Banking exam is a standardized, multiple-choice credit-by-examination test that lets learners earn college credit in money and banking or introductory finance without sitting through a full course. It is most useful for adult learners, military service members, and transfer students who already understand basic economics and want to demonstrate that knowledge efficiently. The DSST Money and Banking study guide has 7 sections and about 2,723 words.
01Money and the Financial System: Functions, Measures, and Why Intermediation Exists
Definitions and the economic logic behind money: why it exists, how the Federal Reserve measures it, and what the financial system does that barter cannot. Money is defined by what it does, not what it is made of: Medium of exchange - eliminates the double coincidence of wants that makes barter costly.
434 words, about 2 min02Financial Markets and Instruments: Structure, Pricing, and Yield Spreads
Primary markets issue new securities (IPOs, Treasury auctions); secondary markets trade existing claims, providing liquidity and price discovery. Money markets trade debt maturing in one year or less: Treasury bills, negotiable CDs, commercial paper, repurchase agreements, banker's acceptances, Eurodollars.
383 words, about 2 min03Financial Institutions and Intermediation: Transformation and Asymmetric Information
Banks transform assets. They issue liabilities (deposits) that are liquid, small-denomination, and low-risk, and hold assets (loans, securities) that are illiquid, large, and risky.
360 words, about 2 min04Central Banking and the Federal Reserve: Structure, FOMC, and Tools
The Fed, created in 1913, has three parts. The Board of Governors (seven members, 14-year staggered terms, appointed by the President and confirmed by the Senate) supervises bank holding companies and sets reserve requirements and the discount rate (subject to Reserve Bank approval).
431 words, about 2 min05Monetary Theory and Policy: Demand, Multiplier, and Transmission
Quantity theory : MV = PY. If velocity is stable, money growth determines nominal GDP and, in the long run, inflation.
379 words, about 2 min06International Finance and Exchange Rates: Parity, Regimes, and Adjustment
A double-entry record with three parts: the current account (goods, services, income, unilateral transfers), the financial/capital account (direct investment, portfolio flows, bank flows), and official reserves . A current-account deficit is matched by net capital inflow or reserve loss.
376 words, about 2 min07Bank Management and Regulation: Balance Sheet, Risk, and Capital Rules
Assets: reserves and cash items, securities, loans (largest, least liquid, highest-yielding), and fixed assets. Liabilities: checkable deposits, savings and time deposits, borrowings.
360 words, about 2 min