CFP Course 1: Introduction to Financial Planning Questions and Answers Updated 2026

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