UNIT 1 MICROECONOMICS AND MACROECONOMICS

1. What does economics study?

Economics studies how people choose to use resources the most effectively to
produce goods and services in order to best satisfy human demand.
2. What does microeconomics study?
Microeconomics is the branch of economics that is concerned with individual areas of
economic activity, such as those within a particular company or relating to a particular
market.
OR: Microeconomics studies how consumers, workers, and firms can best use their
limited resources/ can use their limited resources the most efficiently/ can make the
most of their limited resources in order to best satisfy their demand.
3. What does macroeconomics study?
Macroeconomics is the branch of economics that is concerned with the major, general
features of a country’s economy, such as the level of inflation, unemployment, or
interest rates.
4. What are three types of resources? Give examples for each type of resources.
A country's resources are the things that it has and can use to increase its wealth, such
as coal, oil, or land.
The resources of an organization or person are the materials, money, and other things
that they have and can use in order to function properly.
All resources can be divided into:
 Natural resources: land – đất đai, oil – dầu mỏ, coal – than đá, wind – gió, water –
nước, solar energy – năng lượng mặt trời, etc.
 Human resources: time, talent, knowledge, technology, inventions – phát minh,
patents – sang chế, etc.
 Capital (physical assets – tài sản dạng vật chất: buildings, equipment, etc. + financial
assets – tài sản bằng tiền: shares, bonds, accounts, investments, etc.)
5. What does the term “well-being” mean?
“Well-being” refers to people’s satisfaction gained from the goods & services they
consume, the time they share with relatives and so on.
6. Name three themes of microeconomics.
Three themes of microeconomics are:
+ The allocation of scarce resources
+ The role of prices in the economy
+ The role of markets in the economy
7. What does CPI stand for? What does it mean?
CPI stands for Consumer Price Index: Chỉ số giá tiêu dùng
According to US economics, CPI is a measure of the average price of goods and
services purchased by consumers, used as an index of inflation
8. What does the term “trade-off” mean?
A trade-off is a situation where you make a compromise between two things, or where
you exchange all or part of one thing for another.
 9. Why do consumers/ workers or firms have to make trade-offs?
Because their resources are limited, whereas/ while their demand is unlimited.
10. What does the consumer theory describe?
Consumer theory describes how consumers, based on their preferences, maximize
their well-being by making trade-offs
11. What does the theory of the firms describe?
The theory of the firms describe how firms can best make trade-off by using their
limited resources to deal with business practices such as what to produce, how to
produce and for whom to produce.

QUESTIONS FOR TOPICS

1. What are resources of consumers? How do they allocate their resources? (What are
examples for trade-offs made by consumers?)
Consumers have limited incomes. The consumer theory describes how consumers
can best make trade-offs based on their limited resources and preferences. For
example, they may trade off the purchase of more of some goods with the purchase of
less of others. Another example may be trading off current consumption for future.
- Prefer (v): prefer sth to sth: thích cái gì hơn cái gì
- Preferences: sở thích

2. What are resources of workers? How do they allocate their resources? (What are
examples for trade-offs made by workers)
Resources of workers are their time and talent, knowledge, working experience, etc.
All these resources are limited, so they have to make trade-offs. For example, they
have to decide when to enter the workforce (when finishing high schools or
graduating from universities), which job to do, who to work for. They can choose to
work for large companies with job security but limited potential for advancement or
for small companies with more opportunity for advancement but less security. They
also have to decide how many hours for work and how many hours for leisure and so
on.

3. What are resources of firms? How do they allocate their resources? (What are
examples for trade-offs made by firms?)
Resources of firms are human resources, financial resources, production capacity,
technology, management ability, reputation (trade mark), brands, and so on. These
resources are scarce so companies have to make trade-offs. They have to decide what
to produce, how to produce and for whom to produce. For example, (lấy ví dụ về 1
công ty cụ thể). Thus, the theory of the firm describes how companies can best make
trade-offs.

4. What does microeconomics study?

 Microeconomics is a branch of economics that deals with how consumers, workers
and firms behave while making decisions on the allocation of their scarce resources.
Because their resources are limited so all consumers, workers and firms have to make
trade-offs. For example, first, consumers have to trade off the purchase of more of
some goods with the purchase of less of others. Second, workers have to make choice
of employment, employer (who to work for), and how many hours for work. Last,
firms have to decide what to produce, how to produce and for whom to produce.
Microeconomics also studies other important themes such as the role of prices and the
role of markets in the economy.
Deal with = study = look at + behavior of consumers, workers and firms

5. What does macroeconomics study?

Macroeconomics is the branch of economics that studies the role of both markets (the
invisible hand) and governments (the visible hand) in the economy. Specifically,
macroeconomics studies interactions among all economic factors such as economic
growth, inflation, employment and so on, as well as economic relations between
different countries in the world. / as well as international marketplace. Moreover,
macroeconomics also studies the regulation of the economy by the government.
Usually, the government uses macroeconomics policies such as fiscal policy and
monetary policy to promote the economic growth, to reduce unemployment and to
control inflation.

UNIT 2 PUBLIC FINANCE

1. What are federal funds?
Federal funds are government’s revenues generated from individual income taxes,
corporate income taxes and some others.
2. For what purpose are federal funds used?
Federal funds are used for / spent on the government’s annual projects or programs.
3. What are trust funds?
Trust funds are generated from payroll taxes.
4. For what purpose are these funds used?
Trust funds can be used only to pay for Social Security (an sinh xã hội) and Medicare.
5. By what way does the Treasury borrow money?
The Treasury can borrow money by (1) selling securities directly through its website
and (2) indirectly via banks or brokers
6. Who does the Federal Government owe money to?
The government can borrow money from both international investors and domestic
investors.
7. Who can be international investors that buy government bonds?
International investors who can buy the government bonds are governments of other
countries, and foreign individuals or organizations.
 8. Who can be domestic investors that buy government bonds?
Domestic investors can be the Central bank, local governments and citizens of the
country.

QUESTIONS FOR TOPICS

1. How are trust funds and federal funds used? Give examples.
Trust funds are the government revenue coming from payroll taxes. They are only
used for social security and medicare such as paying pensions for retired people,
subsidizing social families, and so on.
While federal funds are the government revenue generated from income taxes,
customs duties, excise taxes, etc. They are used for infrastructure, paying salaries for
state employees and for running the government body.

2. What are some sources of gov revenue?

Tax revenue is the first main source of gov revenue. It comes mainly from 3 types of
taxes:
+ Personal Income tax is levied on individual income
+ Payroll tax including social insurance + health insurance is paid jointly by workers
and employers
+ Corporate income tax is imposed on businesses incomes
+ Other types of taxes such as
Customs duty: imposed on imports
Excise tax: imposed on specific goods (spirit, gasoline, cigarettes,…)
Borrowing is the second major source of gov revenue:
+ When: Federal gov spend more money than receive from tax revenues, leading to
the insufficiency to cover gov’s expenditures.
+ How: issuing bonds and other types of securities
+ Where: directly through website or indirectly through banks or brokers
+ Why: making up the diff.

UNIT 3 FISCAL POLICY

1. What is deficit spending?
Deficit spending (bội chi) means spending funds obtained by borrowing or printing
instead of taxation
2. What are objectives of deficit spending?
bjectives of deficit spending are to promote economic growth, to increase employment
or to keep inflation under control.
3. What are tools of fiscal policy?
They are government spending and taxation
 4. What is an expansionary F.P.?
A fiscal policy is expansionary when taxation is reduced, and/or government spending
is increased
OR: A fiscal policy is expansionary when the government reduces taxation
(specifically tax rates), and/or increases government spending.
5. What are objectives of an expansionary fiscal policy?
Objectives of an expansionary fiscal policy are to create more jobs (reduce
unemployment) and to promote economic growth.
6. What is a contractionary F.P.?
A fiscal policy is contractionary when taxation is increased, and/or government
spending is decreased
7. What are objectives of a contractionary fiscal policy?
Objective of a contractionary fiscal policy is to keep inflation under control/ to control
inflation.
8. Why should the government consider fiscal policies of other countries?
Because fiscal policies of other countries may tempt multinational corporations to
relocate by offering them generous tax programs (chương trình ưu đã về thuế) or other
government – controlled benefits
9. What is fiscal policy?
Fiscal policy is one of the major macroeconomic policies which controls the
government spending and revenues and is supervised by the Ministry of Finance.

QUESTIONS FOR TOPICS

1. Under what circumstance would deficit spending be helpful to the economy? Why?
Deficit spending can be helpful when the economic growth rate is low or
unemployment rate is high. For example, when the government borrow more money
to build a new road, the construction creates more jobs for local people who are idle,
so the unemployment rate is reduced. The construction also brings more incomes for
both companies and workers. With more incomes, they tend to spend more, leading to
more production of goods and services, and then the economy tends to grow.

2. Under what circumstance would deficit spending be harmful to the economy? Why?
Deficit spending can be harmful when inflation rate is high. For example, when the
government borrow more money to build a new road, the construction creates more
incomes for both workers and firms. With more incomes, they tend to spend more, so
the aggregate demand will increase, causing an increase in prices, and inflation rate
will be higher. In times of high inflation, it becomes difficult to control inflation and
economic recession or crisis may happen.

3. When should the government conduct expansionary fiscal policy? Why?

The government conduct expansionary fiscal policy when the economic growth rate is
low or unemployment rate is high. For example, when the government borrow more
money to build a new road, the construction creates more jobs for local people who
 are idle, so the unemployment rate is reduced. The construction also brings more
incomes for both companies and workers. With more incomes, they tend to spend
more, leading to more production of goods and services, and then the economy tends
to grow.

4. When should the government conduct contractionary fiscal policy? Why?

The government conduct contractionary fiscal policy when inflation rate is high. For
example, when the government increase income tax rates, both workers and firms will
have less money to spend or invest, so the aggregate demand will reduce. This will
then reduce pressure on prices, and inflation tends to reduce.

UNIT 4 MONETARY POLICY

1. What does money supply include?
Money supply includes credit, cash (coins and currency in circulation), checks
(checking accounts & traveler’s checks), and money market mutual funds.
2. What does credit include?
Credit includes loans, bonds, and mortgages
3. What is monetary policy?
Monetary Policy is one of the major macroeconomic policies which controls/ manages
the money supply and is supervised by the Central bank.
4. What are 3 tools of monetary policy?
Three main tools of monetary policy are reserve requirements, discount rates and open
market operations.
5. What is reserve requirement?
Reserve requirement is/ refers to a percentage of deposits that the central bank sets as
the minimum amount of reserves as banks must have
6. What is the role of reserve requirement?
Reserve requirements determine the amount banks hold as reserves, so they determine
the bank lending capacity (how much money banks can have to lend out)
7. What is discount rate?
The discount rate is the rate of interest that the central bank of a country charges on
the loans that it makes to other banks.
8. What are open market operations?
Open market operations mean the central bank’s buying and selling government
securities on the open market.
9. What is an expansionary monetary policy?
Monetary policy is expansionary when the central bank lowers reserve requirements,
drops the discount (bank) rates, or buys more bonds.
10. What are the objectives (goals) of an expansionary monetary policy?
Objectives of an expansionary monetary policy are to reduce unemployment, to
promote economic growth.
 11. What is restrictive monetary policy?
Monetary policy is restrictive when the central bank increases reserve requirements, or
the discount (bank) rates, or sells more bonds.
12. What are the objectives (goals) of a restrictive monetary policy?
The objective of a restrictive monetary policy is to reduce aggregate demand, so to
reduce inflation rates/ or to cool the overheating economy.

QUESTIONS FOR TOPICS

1. Under what circumstances should the Central bank conduct expansionary
monetary policy? And why?
Monetary policy should be expansionary when the economic growth rate is low or
unemployment rate is high. For example, when the central bank reduces reserve
requirement, or discount rate or buys government bonds, this will increase the bank
lending capacity or increase money in the circulation. The increased money supply
encourage spending, leading to more investment and production of goods and
services, the economy then tends to grow.

2. Under what circumstances should the Central bank conduct restrictive monetary
policy? And why?
Monetary policy should be restrictive when the economy is overheating or inflation
rate is high. For example, when the central bank increases reserve requirement, or
discount rate or sells government bonds, these actions will reduce the bank lending
capacity or reduce the money supply, leading to reduced investment and consumption.
When the aggregate demand reduces, the prices of goods and services tend to reduce,
and inflation rate is likely to reduce.

UNIT 5 FINANCIAL MARKETS

1. What is the main function of financial markets?
Financial markets perform the essential economic function of channeling funds from
households (individuals), firms (organizations), and governments (chính quyền) that
have saved surplus funds by spending less than their income to those that have a
shortage of funds (money/ capital) because they wish to spend more than their income.
2. What are securities?
Securities are mostly shares and bonds and other valuable papers.
3. What are debt markets?
A debt market is the financial market in which/ where debt instruments such as bonds
or mortgages are traded.
4. What are equity markets?
Equity markets are the financial markets in which equity instruments (equities) are
traded.
5. What can the debt holders (creditor) receive for holding debt instruments?
They can receive determined regular interests for holding debt instruments
 6. What can equity holders (shareholders) be paid by the company?
Equity holders (shareholders) can receive flexible (unfixed) dividends paid by the
company.
7. What can shareholders do if they want to get back their money?
If they want to get back their money they can sell their shares to others (someone else
on the equity markets.
8. What is the main disadvantage of owning a corporation’s equities rather than its
debt?
It is that an equity holder is a residual claimant - that is, the corporation must pay all
its debt holders before it pays its equity holders.
9. What are primary markets?
A primary market is a financial market in which new issues of a security, such as a
bond or a stock, are sold to initial buyers by the corporation or government agency
borrowing funds.
10. What are secondary markets?
A secondary market is a financial market in which securities that have been previously
issued can be resold.
11. Can issuers raise more money in secondary markets? Why/ why not?
Issuers of stocks and bonds can’t raise more money in secondary markets because in
these markets previously issued securities are traded.
12. What do investment banks do in primary markets?
They assist in the initial sale of securities in the primary market by underwriting
securities: They guarantees a price for a corporation's securities and then sells them to
the public.
13. What are Exchanges?
Exchange is an organized market in which transactions (trading) are (is) made in a
physical place (called a trading floor – sàn giao dịch) and during fixed hours (called a
trading session – phiên giao dịch).
14. What are OTC markets?
An OTC market is a market in which transactions are made through/ via means of
communication such as computer link or telephone and throughout the day.
15. What are money markets?
The money market is a financial market in which only short-term debt instruments
(generally those with original maturity of less than one year) are traded
16. What are capital markets?
The capital market is the market in which longer-term debt instruments (generally
those with original maturity of one year or greater) and equity instruments are traded.

QUESTIONS FOR TOPICS

1. How do debt markets operate?
Debt markets are the markets in which debt instruments such as bonds or mortgages
are traded.
+ The borrowers have to pay debt holders fixed amounts of money at regular intervals,
consisting of interest and principal payments until a specified date (the maturity date),
when a final payment is made.
 + The debt holders always know how much their money will be worth in a certain
period of time.

2. How do equity markets operate?

Equity markets are the markets in which equity instruments such as stocks are traded.
The stockholders are entitled to parts of the company’s assets and are paid periodic
dividends. They can only get back their money by selling their shares to other
investors on secondary securities markets, but not from the share issuers. Dividends
are flexible, it means that dividends can be paid or not to the stockholders

3. How do primary markets operate?

A primary market is a financial market in which new issues of a security, such as a
bond or a stock, are sold to initial buyers by the corporation or government agency
borrowing funds. Initial buyers are often investment banks, stock companies or
insurance companies. These markets help the issuers of share or bonds to raise more
capital. However they are not well-known to the public because fresh securities are
sold to initial buyers.

4. How do secondary markets operate?

A secondary market is a financial market in which securities that have been previously
issued can be resold.
These markets don’t help issuers of shares or bonds to increase more money.
However, prices of fresh securities on the primary markets are determined by the
secondary markets.
These markets makes securities more liquid because the investors can get back their
money by selling their securities on the secondary markets.

5. What are differences between Exchanges and OTC markets?

Exchanges
- Exchange is the market in which
trading security is conducted in a
central location (trading floor)
- Trading hours are fixed.
OTC market
- OTC is the market in which trading
securities is conducted at different
location. Means of communication
are phone, computer,…
- No fixed trading hours

6. 2 types of gov debts

Debt held by federal accounts: is the amount of money the Treasury has borrowed
from itself. It takes the surplus of trust funds to pay for gov spending.
Debt held by the public: is the total amount of money the gov owes to
creditors/lenders in the general public. That includes domestic private investors,
foreign investors, the Central bank (FED), gov of foreign countries and citizens.
7. In what way do tax and gov spending influence the economy?