Monday, October 12, 2009

DSST Money and Banking Exam

According to the military's DANTES program, the DSST Money & Banking exam has one of the lowest pass rates at only 16%. Not realizing this at the time, I decided to "wing it" with some free time left over during an exam session last month, and ended up passing it. The kind of knowledge that I used to pass the exam was acquired over a few years as a matter of recreation, but could be acquired over a few weeks if one were intentionally studying for this exam.

Before you read this guide any further, know that if you have already passed a good macroeconomics exam or course that required a knowledge of the Federal Reserve, interest rates, and monetary theory, then you can probably just write this exam and pass it, provided that you still remember all of those dry details.

Now, if you don't know these things, you have some studying ahead of you. First of all, if you haven't already done so, read a free online copy of Henry Hazlitt's Economics in One Lesson cover to cover. It's annoying to have to read a book when you want to challenge an exam quickly, but you must have a firm understanding of the concepts of supply, demand, shortages, surpluses, and consequences of command economics, and be able to apply this knowledge in practical examples, before you can consider refining your knowledge to the subject of money and banking. Skipping over this step would be like trying to write a calculus exam without understanding the principles of addition and subtraction. If you want to purchase a physical copy of Economics in One Lesson instead of reading it online, you can help support this website by purchasing it through here.

Next, start reading about monetary policy. You can read the Wikipedia entry on the subject here. Pay special attention to terms like interest rates, CPI, overnight rate, federal funds rate, prime rate, and so on. Understand the difference between real and nominal income/interest rates.

Know the structure of the Federal Reserve System, particularly how many banks it has, which cities they are located in, how the Board of Governors is chosen, and who the current chairman is.
Know a bit about the Federal Open Market Committee.

Watch a lot of Peter Schiff's television interviews about the economy. Unlike most interviewees on the subject of economics, he likes to bring interest rates into the picture. His comments on how inflation and deflation affect the economy are very relevant. You can also listen to a good interview referring a lot to inflationary monetary policy here:

Once you've immersed yourself in economic study for a week or two, you should be ready to write the exam and save yourself some money that you would have otherwise spent on an expensive course in Money and Banking. If you pass the exam, you'll probably know not to put the saved money into a bank account even if interest-bearing, lest its real value be consumed by a greater inflation rate.

You can read the DSST study guide for Money and Banking here.

1 comment:

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