CFP Course 1: Introduction to
Financial Planning Questions and
Answers Updated 2026
awBofBsupplyB-
BAnswerWhenBmarketBpriceBincreases,BsupplyBincreasesB(incentiveBtoBsupplyBmoreBisBh
igherBbecauseBfirmsBcanBmakeBmoreB$)
MovementBalongBtheBcurve
ShiftBinBtheBcurve:BChangesBinBsupplyBoutsideBofBpriceB(moreBsecularBchangesB-
BnewBtech,Betc)
LawBofBdemandB-BAnswerWhenBmarketBpriceBincreases,BdemandBdecreases
ShiftBinBtheBcurve:BChangesBinBdemandBoutsideBofBpriceB(demandBcanBshiftBtoBanothe
rBrelatedBgoodBifBsomethingBaffectsBtheBoriginalBgoodB(E.BColiBinBbeefB--
BshiftBtoBchicken))
EquilibriumBpriceB-
BAnswerPointBwhereBsupplyBcurveBintersectsBdemandBcurveB(quantityBdemandedB=Bqu
antityBsuppliedBatBcurrentBprice)
PriceBelasticityBofBdemandB(PED)B-
BAnswerHowBsensitiveBconsumersBareBtoBchangeBinBpriceB(luxuryBgoodBvs.BcrudeBoil)B-
BavailabilityBofBsubstitutes,BrelevanceBtoBbudget,BandBtimeBdetermineBthis
EquilibriumBoutputB-
BAnswerAggregateBoutputBorBincomeB(Y)BorBGrossBDomesticBProductB(GDP)
SumBofBtotalBconsumption,BcorporateBcapitalBinvestments,BnetBexports,BandBgovernme
ntBspending
,FiscalBpolicyB-
BAnswerCongressB(federalBgovernment)BhasBtheBpowerBtoBinfluenceBtotalBconsumerBde
mand
Goals:BhighBemployment,BsustainableBgrowth,BstableBprices
ExpansionaryBorBcontractionary
TaxationB-BAnswerAsBtaxesBdecrease,BconsumptionBincreases
GovernmentBspendsBnoBlessBthanBbeforeBtaxBcut
DelayedBeffectBonBGDPBbecauseBpeopleBtakeBtimeBtoBmakeBdecisionsBaboutBanBincrea
seBorBdecreaseBinBincome
BalancedBbudgetB-
BAnswerIncreaseBinBgovernmentBspendingBisBMATCHEDBbyBanBincreaseBinBtaxesBother
wise,BdeficitB->BUSBTreasuryBissuesBbondsB-
>BbanksBmonetizeBtheBdebtBbyBcreditingBtheBTreasuryBandBincreasingBtheBmoneyBsupp
ly
IfBgovernmentBspendingB=BtaxationBamount,BthisBwouldBbeB1
EconomicBconditionsBautomaticallyBinfluenceBsomeBaspectsBofBgovernmentBspendingB-
BAnswerIfBrecession,BpeopleBhaveBlessBincomeBtoBbeBtaxedBon,BsoBgovernmentBtakesBt
hatBintoBaccount
SuccessorBfailureBofBfiscalBpoliciesBcanBonlyBbeBjudgedBbasedBonBFull-
EmploymentBBudgetBconditionsBbecauseBitBcontrolsBforBeconomicBinfluences
,MonetaryBpolicyB-
BAnswerControlsBtheBsupplyBofBmoney,BandBinfluencesBbankBlendingBandBinterestBrates
MoneyBsupplyB-
BAnswerTransactionBmoneyB(M1):BallBcurrencyBheldBoutsideBofBbankBvaultsBandBcanBb
eBusedBdirectlyBforBtransactionsB(mostBofBthisBisBmadeBupBofBtransactionBmoneyB-
BfundsBheldBinBdemandBdepositsB(checkingBaccounts,Betc.)
BroadBmoneyB(M2):BM1B+Bsavings,BmoneyBmarketBaccountsB(assetsBthatBcanBbeBquickl
yBconvertedBtoBM1BforBuseBinBtransactions)
TheBFederalBReserveBBankB(theBFed)B-BAnswerCentralBbankB(banker'sBbank)
ClearBinter-
bankBpayments,BauditBbankBrecords,BregulateBtheBbankingBsystem,BandBassistBbanksBin
BdifficultBfinancialBsituations
IssueBTreasuryBsavingsBbondsBandBreleaseBfundsBtoBpayBgovernmentBbills
ManageBexchangeBratesBandBnation'sBforeignBexchangeBreserves
RequiredBreserveBratioB-
BAnswerTheBamountBofBtotalBdepositsBtheBFedBrequiresBitsBmembersBtoBkeepBwithBth
emBatBtheBendBofBtheBbusinessBdayB(affectsBtheBamountBbanksBcanBloanBtoBpeople)
DiscountBrateB-BAnswerTheBinterestBrateBbanksBpayBtheBFed
AsBratesBincrease,BborrowingBdecreasesBbecauseBit'sBmoreBexpensive
FederalBfundsBrate:BtheBrateBbanksBchargeBotherBbanksBonBovernightBloansB(FedBsetsB
aBtargetedBrangeBbutBdoesBnotBdirectlyBinfluenceBit)
, PrimeBrate:BrateBthatBbanksBextendBtoBtheirBmostBfavoredBcustomers
OpenBmarketBoperationsB-
BAnswerFed'sBbuyingBandBsellingBofBgovernmentBsecuritiesBinBtheBopenBmarketB(usedB
toBexpandBorBcontractBmoneyBsupply)
TightBmonetaryBpolicyB-
BAnswerFedBdecreasesBtheBmoneyBsupplyBtoBrestrainBtheBeconomyBandBslowBdownBin
flation
EasyBmonetaryBpolicyB-
BAnswerFedBincreasesBtheBmoneyBsupplyBtoBstimulateBtheBeconomy
InflationB-BAnswerGeneralBriseBinBtheBpricesBofBgoodsBandBservices
ConsumerBPriceBIndexB(CPI)BisBusedBtoBgaugeBinflation
YourBinvestmentsBmustBearnBaBhigherBreturnBthanByourBtaxBandBinflationBrates
DeflationB-BAnswerDecreaseBinBoverallBpriceBlevel
DisinflationB-BAnswerRateBofBinflationBstillBgoingBup,BbutBslower
HyperinflationB-BAnswerRateBgoingBupBquickly
StagflationB-
BAnswerAsBpricesBdecrease,BeconomicBgrowthBdecreases,BunemploymentBincreases
PeriodBofBhighBinflationBwithBslowBorBstagnantBeconomicBgrowth
Financial Planning Questions and
Answers Updated 2026
awBofBsupplyB-
BAnswerWhenBmarketBpriceBincreases,BsupplyBincreasesB(incentiveBtoBsupplyBmoreBisBh
igherBbecauseBfirmsBcanBmakeBmoreB$)
MovementBalongBtheBcurve
ShiftBinBtheBcurve:BChangesBinBsupplyBoutsideBofBpriceB(moreBsecularBchangesB-
BnewBtech,Betc)
LawBofBdemandB-BAnswerWhenBmarketBpriceBincreases,BdemandBdecreases
ShiftBinBtheBcurve:BChangesBinBdemandBoutsideBofBpriceB(demandBcanBshiftBtoBanothe
rBrelatedBgoodBifBsomethingBaffectsBtheBoriginalBgoodB(E.BColiBinBbeefB--
BshiftBtoBchicken))
EquilibriumBpriceB-
BAnswerPointBwhereBsupplyBcurveBintersectsBdemandBcurveB(quantityBdemandedB=Bqu
antityBsuppliedBatBcurrentBprice)
PriceBelasticityBofBdemandB(PED)B-
BAnswerHowBsensitiveBconsumersBareBtoBchangeBinBpriceB(luxuryBgoodBvs.BcrudeBoil)B-
BavailabilityBofBsubstitutes,BrelevanceBtoBbudget,BandBtimeBdetermineBthis
EquilibriumBoutputB-
BAnswerAggregateBoutputBorBincomeB(Y)BorBGrossBDomesticBProductB(GDP)
SumBofBtotalBconsumption,BcorporateBcapitalBinvestments,BnetBexports,BandBgovernme
ntBspending
,FiscalBpolicyB-
BAnswerCongressB(federalBgovernment)BhasBtheBpowerBtoBinfluenceBtotalBconsumerBde
mand
Goals:BhighBemployment,BsustainableBgrowth,BstableBprices
ExpansionaryBorBcontractionary
TaxationB-BAnswerAsBtaxesBdecrease,BconsumptionBincreases
GovernmentBspendsBnoBlessBthanBbeforeBtaxBcut
DelayedBeffectBonBGDPBbecauseBpeopleBtakeBtimeBtoBmakeBdecisionsBaboutBanBincrea
seBorBdecreaseBinBincome
BalancedBbudgetB-
BAnswerIncreaseBinBgovernmentBspendingBisBMATCHEDBbyBanBincreaseBinBtaxesBother
wise,BdeficitB->BUSBTreasuryBissuesBbondsB-
>BbanksBmonetizeBtheBdebtBbyBcreditingBtheBTreasuryBandBincreasingBtheBmoneyBsupp
ly
IfBgovernmentBspendingB=BtaxationBamount,BthisBwouldBbeB1
EconomicBconditionsBautomaticallyBinfluenceBsomeBaspectsBofBgovernmentBspendingB-
BAnswerIfBrecession,BpeopleBhaveBlessBincomeBtoBbeBtaxedBon,BsoBgovernmentBtakesBt
hatBintoBaccount
SuccessorBfailureBofBfiscalBpoliciesBcanBonlyBbeBjudgedBbasedBonBFull-
EmploymentBBudgetBconditionsBbecauseBitBcontrolsBforBeconomicBinfluences
,MonetaryBpolicyB-
BAnswerControlsBtheBsupplyBofBmoney,BandBinfluencesBbankBlendingBandBinterestBrates
MoneyBsupplyB-
BAnswerTransactionBmoneyB(M1):BallBcurrencyBheldBoutsideBofBbankBvaultsBandBcanBb
eBusedBdirectlyBforBtransactionsB(mostBofBthisBisBmadeBupBofBtransactionBmoneyB-
BfundsBheldBinBdemandBdepositsB(checkingBaccounts,Betc.)
BroadBmoneyB(M2):BM1B+Bsavings,BmoneyBmarketBaccountsB(assetsBthatBcanBbeBquickl
yBconvertedBtoBM1BforBuseBinBtransactions)
TheBFederalBReserveBBankB(theBFed)B-BAnswerCentralBbankB(banker'sBbank)
ClearBinter-
bankBpayments,BauditBbankBrecords,BregulateBtheBbankingBsystem,BandBassistBbanksBin
BdifficultBfinancialBsituations
IssueBTreasuryBsavingsBbondsBandBreleaseBfundsBtoBpayBgovernmentBbills
ManageBexchangeBratesBandBnation'sBforeignBexchangeBreserves
RequiredBreserveBratioB-
BAnswerTheBamountBofBtotalBdepositsBtheBFedBrequiresBitsBmembersBtoBkeepBwithBth
emBatBtheBendBofBtheBbusinessBdayB(affectsBtheBamountBbanksBcanBloanBtoBpeople)
DiscountBrateB-BAnswerTheBinterestBrateBbanksBpayBtheBFed
AsBratesBincrease,BborrowingBdecreasesBbecauseBit'sBmoreBexpensive
FederalBfundsBrate:BtheBrateBbanksBchargeBotherBbanksBonBovernightBloansB(FedBsetsB
aBtargetedBrangeBbutBdoesBnotBdirectlyBinfluenceBit)
, PrimeBrate:BrateBthatBbanksBextendBtoBtheirBmostBfavoredBcustomers
OpenBmarketBoperationsB-
BAnswerFed'sBbuyingBandBsellingBofBgovernmentBsecuritiesBinBtheBopenBmarketB(usedB
toBexpandBorBcontractBmoneyBsupply)
TightBmonetaryBpolicyB-
BAnswerFedBdecreasesBtheBmoneyBsupplyBtoBrestrainBtheBeconomyBandBslowBdownBin
flation
EasyBmonetaryBpolicyB-
BAnswerFedBincreasesBtheBmoneyBsupplyBtoBstimulateBtheBeconomy
InflationB-BAnswerGeneralBriseBinBtheBpricesBofBgoodsBandBservices
ConsumerBPriceBIndexB(CPI)BisBusedBtoBgaugeBinflation
YourBinvestmentsBmustBearnBaBhigherBreturnBthanByourBtaxBandBinflationBrates
DeflationB-BAnswerDecreaseBinBoverallBpriceBlevel
DisinflationB-BAnswerRateBofBinflationBstillBgoingBup,BbutBslower
HyperinflationB-BAnswerRateBgoingBupBquickly
StagflationB-
BAnswerAsBpricesBdecrease,BeconomicBgrowthBdecreases,BunemploymentBincreases
PeriodBofBhighBinflationBwithBslowBorBstagnantBeconomicBgrowth
