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CFP > Intro To Financial Planning > Flashcards

Intro To Financial Planning Flashcards

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CFP® flashcards
1
Q

Supply & Demand Curve (Supply): Movement ALONG the Curve is caused by?

A

Price

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2
Q

Supply & Demand Curve (Supply):
Higher Price = ?
Lower Price = ?

A

Higher: Increase in quantity supplied
Lower: Increase in demand of good or service

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3
Q

Supply & Demand Curve (Supply): Shift OF the curve is caused by?

A

Non-price related changes

  • New technology
  • changes in # of producers
  • market expectations/conditions
  • change in price of related goods/services
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4
Q

Law of Demand:

Price High= Demand _____

A

Falls

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5
Q

Law of Demand:

Price Low= Demand _____

A

Rises

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6
Q

Equilibrium Price: What tendency is there for change at this price?

A

Supply and Demand curves intersect - this price is where there’s NO tendency for change

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7
Q

Buyer’s response to a change in price is known as…

A

Price Elasticity of Demand

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8
Q

Elastic Price - Will change in price impact demand? (luxury goods)

A

Price change WILL impact demand

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9
Q

Inelastic Price (everyday goods)

A

Price change WON’T impact demand

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10
Q

GDP is the sum of what 4-factors?

A
  1. Total consumption
  2. Corporate Capital Investments
  3. Net Exports
  4. Government Spending
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11
Q

True/False: Congress controls Fiscal Policy

A

True

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12
Q

What are the 3-main goals of Fiscal Policy?

A
  1. High Employment
  2. Sustainable Growth
  3. Stable Prices
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13
Q

What (2) “tools” are available to Congress to control Fiscal Policy?

A
  1. Taxes

2. Government Spending

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14
Q

True/False: A ‘deficit’ is when taxes exceed spending

A

False

- Deficit=spending exceeds taxes

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15
Q

3-things that happen when “Monetizing Debt” are:

A
  1. Spending exceeds taxes (deficit)
  2. US Treasury issues bonds ‘bought back’ by banks/investors
  3. Buying increases the money supply (i.e. cash injection)
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16
Q

Who controls Monetary Policy?

A

The Federal Reserve (“The Fed”)

17
Q

True/False: Congress controls the supply of money

A

False

- The Fed controls the supply of money

18
Q

What are the (2) types of money supplies?

A
  1. “Transaction” Money (currency, checking accounts, travelers checks)
  2. Broad Money (savings accounts, MMA accounts)
19
Q

The Fed can influence the economy in what 3-ways?

A
  1. Interest Rates
  2. Buying/Selling Treasury Securities
  3. Setting bank reserve requirements to control lending
20
Q

The Fed buying treasury securities will __________ the money supply

A

Increase

21
Q

The Fed selling treasury securities will ___________ the money supply

A

Decrease

22
Q

What ratio can either stimulate or restrict the economy based on The Fed’s action?

A

Required Reserve Ratio

23
Q

Required Reserve Ratio:

Higher Reserves = less money to loan & ______ spending

A

LESS

Higher = less & less

24
Q

Required Reserve Ratio:

Lower Reserves = _______ money to loan & more spending

A

MORE

Lower = more & more

25
Q

Discount (interest) Rate: who pays who?

The Fed & Banks

A

Banks pay The Fed

Higher rates=higher cost of borrowing
Lower rates=lower cost of borrowing (COVID 2020)

26
Q

What is the rate that banks charge each other to borrow via overnight loans?

A

Federal Funds Rate

27
Q

True/False: The Federal Funds Rate is directly influenced by the Discount Rate by The Fed?

A

FALSE

the discount rate INDIRECTLY influences the Fed Funds Rate by The Fed setting a ‘target range’

28
Q

The lending rate offered by banks to favored customers is better known as the….

A

Prime Rate

based on The Fed’s discount rate

29
Q

Increase in money supply, more reserves, and more lending available are all factors of The Fed ______ (buying/selling) US Treasury & Govt. Securities

A

BUYING

30
Q

Decrease in money supply, less reserves, and less lending available are all factors of The Fed _______ (buying/selling) US Treasury & Govt. Securities

A

SELLING

31
Q

When GDP is negative for 2-consecutive quarters, we are in a ___________

A

Recession

32
Q

GDP without inflation is:
A. Real
B. Nominal

A

A. Real

33
Q

GDP with inflation is:
A. Real
B. Nominal

A

Nominal

34
Q

Real GDP includes 3-factors, what are they?

A
  1. Market value of all final goods & services produced in a country
  2. Income of foreigners working in the US
  3. Profits foreign companies earn in the US
35
Q

Inflation within a business cycle includes? (5-items)

A
  1. Demand exceeds supply @ current prices
  2. Prices bid UP
  3. Over-expansion due to expectation of rising profits
  4. Increased interest rates
  5. Depressed real income
36
Q

General Inflation is made up of a COMBINATION of these 5-things:

A
  1. Price increases
  2. Low unemployment
  3. High wages
  4. Rapid economic growth
  5. Rising levels of credit

CFP (1 decks)

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