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Churning involves excessive trades or switches without client benefit, designed to generate commissions. Breakpoint sales (A) misuse mutual fund discounts, selling away (C) is unauthorized private sales, and discretionary trading (D) requires written client consent. Suitability violations are key FINRA exam points.

When the Fed buys Treasuries, it injects liquidity into the banking system, lowering rates and easing policy. Raising rates (A) and reserves (B) tighten money supply, while selling securities (D) withdraws funds. FINRA exams test Fed tools because they influence markets and investment strategy.

The Investment Company Act of 1940 governs the structure and operations of investment companies, including mutual funds, closed-end funds, and ETFs. It requires registration with the SEC and mandates disclosure of investment policies and risks. The Securities Exchange Act (A) governs secondary markets, SIPA (C) established SIPC for investor protection, and Sarbanes-Oxley (D) focuses on corporate governance. For Series exams, candidates must distinguish which laws regulate different areas of the securities industry, as misapplication could result in compliance failures.

Municipal bonds pay interest that is generally exempt from federal income tax, and sometimes state/local taxes. Corporate bonds (A) and Treasuries (C) are taxable, while preferred stock (D) dividends are also taxable. Tax treatment is a major factor in suitability and a frequent Series exam focus.

Real GDP adjusts nominal GDP for inflation, providing a clearer picture of economic growth. Nominal GDP (A) ignores inflation. GNP (C) includes income earned by nationals abroad, while CPI (D) measures inflation directly. FINRA exams test macroeconomic indicators because they influence markets and client investment strategies.