UNIT 1

1. What are 3 important themes of microeconomics?

- 3 important themes of microeconomics are: the allocation of scarce resources, the
role of prices and the role of markets.
2. Why do people (consumers, workers and firms) have to make trade-offs?
All of resources are scarce, while human demand is unlimited
3. What is the first theme studied in microeconomics?
It is the allocation of scare resources.
4. What are limited resources of consumers?
The limited resources of consumers are their incomes.
5. Give an example for trade-offs made by consumers?
Consumers 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
consumption.
6. What does the consumer theory describe?
The consumer theory describes how consumers can best make trade-offs based on
their limited resources and preferences.
7. What are limited resources of workers?
Resources of workers are their time and talent, knowledge, working experience, etc.
8. Give an example for trade-offs made by workers?
They have to decide when to enter the workforce, which job to do, who to work for.
9. What are resources of firms?
Resources of firms are human resources, financial resources, production capacity,
technology, management ability, reputation (trade mark), brands, and so on.
10. Give an example for trade-off made by firms?
Firms have to decide what to produce, how to produce and for whom to produce.
11. What does the theory of the firm describe?
The theory of the firm describes how companies can best make trade-offs.
12. Who makes decisions on the allocation of resources in the planned economy?
The Government fixes all production, distribution and consumption quotas
beforehand.
13. Why is it true to say producers have little flexibility of choices in the planned
economy?
Because in the planned economy, firms are told by the government what and how
much to produce, and how to produce it.

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14. What are trade-offs?
A trade-off (n): an exchange; esp., a giving up (từ bỏ) of one benefit, advantage, etc.
in order to gain another regarded as more desirable
15. What do consumers make trade-offs normally based on?
Consumers make trade-offs normally based on their incomes and their preferences.
16. What is the major role of prices?
All of the trade-offs made by consumers, workers and firms are based on the prices.
17. How are prices set in the planned economy?
In the planned economy, prices are set by the government.
18. How are prices set in the market economy?
In the market economy, prices are determined by the interactions of consumers,
workers and firms.

MACROECONOMIC
1. What are two major macroeconomic policies?
They are monetary policy and fiscal policy
2. Who supervises monetary policy?
The Central Bank of each country supervises monetary policy.
3. What does monetary policy control?
It controls the money supply (lượng cung tiền) of a nation.
4. Who supervises fiscal policy?
The Ministry of Finance supervises fiscal policy.
5. What does fiscal policy control?
It controls the government’s revenue and spending
6. What are the main objectives of macroeconomic policies?
The main objectives of macroeconomic policies are: to promote economic growth, to
control inflation and to reduce unemployment rates.
7. What is the definition of macroeconomics?
- Macroeconomics is the branch of economics that studies overall economic trends
within one economy and interactions among different economies in the world.
8. What do economic trends include?
Economic trends include employment levels, economic growth, balance of payments,
inflation and so on.

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9. What does GDP stand for?
GDP stands for Gross Domestic Products.
10. Why are microeconomics and macroeconomics actually interdependent and
complement one another?
They are actually interdependent and complement one another because there are
many overlapping issues between the two fields.
11. What is the definition of “economic trends”?
Economic trends refer to changes or developments in economies.
12. What is a country's balance of payments?
The balance of payments of a country is the difference between the payments it
makes to other countries for imports and the payments it receives from other
countries for exports over a period of time.
13. When is the balance of payments of a country in surplus?
It is in surplus when the country exports more than it imports.
14. When is the balance of payments of a country in deficit?
It is in deficit when the country imports more than it exports.
15. What is the money supply?
The money supply is the total amount of money in a country's economy at any one
time.

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.

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?)

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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, the Ford Motor
Company must decide whether to hire more worker, build new factories or do both
when they expand production. Thus, the theory of the firm describes how companies
can best make trade-offs.

4. How are prices important in the economy? / What is the important role of
prices in the economy?
Prices influence all trade-offs made by consumers, workers and firms. For example,
when prices of a good increase, consumers tend to buy substitutes even they don’t
prefer them. Workers choose employment depending partly on salaries paid to them.
And, a firm’s decisions such as buying more machinery or employing more workers
depend partly on prices of those machines or salaries paid to those workers.

5. What does economics study?

Economics studies how people choose to use limited resources to produce goods and
services in order to best satisfy human demand. Resources consist of natural
resources such as land ,oil, coal, wind, water, solar energy ; human resources
including: time, talent, knowledge, technology, inventions and capital such as
buildings, equipment, bonds. All these resources are limited while human demand is
unlimited. That’s why it’s necessary to study economics. And Economics has 2
branches: microeconomics and macroeconomics.

6. 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.

7. What does macroeconomics study?

- Macroeconomics is the branch of economics that studies the role of both
markets and governments in the economy. Specifically, macroeconomics studies
interactions among all economic factors such as economic growth, inflation,

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employment and so on, as well as economic relations between different countries in
the world.
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.
8. What are differences between microeconomics and macroeconomics?
Microeconomics and macroeconomics are different in some ways. Firstly,
microeconomics focuses on behavior of consumers, workers and firms, while
macroeconomics emphasizes the interactions among all economic factors, the role of
governments in the economy, as well as international economy. Secondly,
microeconomics studies theories of consumers, workers and firms, but
macroeconomics focuses on how governments use their macroeconomic policies to
regulate the economy. Finally, microeconomics analyzes factors influencing behavior
of consumers, workers and firms while macroeconomics analyzes market forces
influencing the economy as a whole.

UNIT 2: Public Finance

1. Where do the government revenues come from?
Or: What are sources of the government revenues?
- The government revenues mostly come from taxation.
2. What are 2 types of funds generated from taxation?
They are trust funds and federal funds.
3. What are trust funds?
Trust funds are the government revenues generated from payroll taxes including
social (national) insurance and health insurance.
4. What are trust funds used for?
Trust funds are used for social security and medicare.
5. What are federal funds?
Federal funds are the government revenues generated from income taxes, customs
duty, excise tax and so on.
6. What are federal funds used for?

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Federal funds are used for the government projects and programs.
7. How can the government borrow money?
The government borrows more money by issuing and selling bonds or other types of
government securities.
8. What are 2 ways for the treasury to sell government securities?
The treasury can sell government securities directly through its website or indirectly
through banks or brokers.
9. Who does the government borrow money from?
The government borrows money from itself and from the public.
10. What is the money that the government borrows from itself called?
It is called debts held by federal accounts.
11. What is the money that the government borrows from the public called?
It is called debts held by the public.
12. What is debt held by federal accounts?
Debt held by federal accounts is the amount of money that the Treasury borrows from
the surplus of trust funds to pay for Gov spending.
13. What is debt held by the public?
Debt held by the public is the total amount the government owes to its creditors in the
general public. (including domestic investors, foreign investors, Gov of foreign
countries)
14. Who are the government’s creditors in the general public?
They are domestic investors and international investors.
15. Who do domestic investors include?
Domestic investors include private domestic investors, the central bank and local
governments.
16. What is individual income tax?
Individual income tax is the tax (which is) imposed/ levied on individual incomes.
17. What is corporate income tax?
Corporate income tax is the tax imposed on corporate incomes
18. What is customs duty?
Customs duty is the tax imposed on imports/ imported goods.
19. What is excise tax?
Excise tax is the tax imposed on specific goods such as alcohol, beer, hotels,
restaurants, and so on.
20. What are payroll taxes?

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Payroll taxes are taxes based on payroll including social insurance and health
insurance paid jointly by workers and employers.

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 coming 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 different sources of money that the government can borrow
from?
The government can borrow money from the surplus of trust funds which are called
debts held by federal accounts. The government can also borrow money from the
public which are called debts held by the public. That includes inside investors and
international investors. Inside investors include domestic private investors, the central
bank (Fed), state and local governments and others.

UNIT 3: FISCAL POLICY

1. What is fiscal policy?
Fiscal policy is a government policy related to taxation and public spending.
2. What is the main objective of fiscal policy?
The main objective of fiscal policy is to maintain economic growth, high employment
and low inflation.
3. What is expansionary fiscal policy?
Fiscal policy is expansionary when taxation is reduced or public spending is
increased.
4. What is contractionary fiscal policy?
Fiscal policy is contractionary when taxation is increased or public spending is
reduced.
5. What is deficit?

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Deficit is the total amount by which money spent is more than money received.
6. What is deficit spending?
Deficit spending is a situation in which a company or especially a government spends
more money than it collects for a given period of time.
Or
What is government’s deficit spending?
Government’s deficit spending means spending funds obtained by borrowing or
printing instead of taxation.
7. What is budget deficit?
Budget deficit is the difference between a government’s income and how much it
spends.
8. What is revenue?
Revenue is the income that a government or company receives regularly.
9. What is inflation?
Inflation is the rise in prices resulting from an increase in the supply of money.
10. What is inflation rate?
Inflation rate is the rate at which prices increase overtime causing the value of money
to fall.
11. What is grant?
Grant is an amount of money given, usually by a government or nonprofit
organization to fund certain projects.
12. What is solvency?
Solvency is the ability to pay all the money that is owed.
13. What is government revenue?
Government revenue is the money received from taxation, fees, fines, securities sales
as well as any sales that are made.
14. How do government spending and taxation affect the economy?
Government spending and taxation affect the economy directly.
15. When is deficit spending helpful for the economy?
Deficit spending is helpful for the economy when unemployment is high or economic
growth is low.
16. When is deficit spending harmful for the economy?
Deficit spending is harmful for the economy when unemployment is low or inflation
is high.
17. Under what circumstances can fiscal policy be expansionary?
Fiscal policy can be expansionary when the economy is not growing fast enough or
unemployment is too high.
18. Under what circumstances can fiscal policy be contractionary?
Fiscal policy can be contractionary when the economy is growing too fast or inflation
is high.
19. What factors should be considered in making decisions on the fiscal policy?

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They are the level of economic growth or unemployment likely in the future, political
considerations, fiscal policies of other countries and the requirements of the IMF.
20. How can deficits be financed?
Deficits can be financed by borrowing or printing more money.
21. What may happen when deficits are financed by borrowing?
The interest rates may rise.
22. What may happen when deficits are financed by printing money?
Prices and inflation may rise.
23. How can the government generate its revenue?
The government generates its revenue by collecting taxes and borrowing more
money.
24. What are the purposes of expansionary fiscal policy?
It is used for creating jobs and developing the economy.
25. What are the purposes of contractionary fiscal policy?
It is used for slowing down the economy and reducing inflation.
26. What are the main tools of fiscal policy?
They are government spending and taxation.
27. Why should the government consider fiscal policies of other countries?
Because fiscal policies of other countries may tempt multinational corporations to
relocate their subsidiaries by offering them generous tax programs or other
government-controlled benefits.

QUESTIONS FOR TOPICS

1. Under what circumstance would deficit spending be helpful to the
economy? Why? Give an example to explain that.
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? Give an example to explain that.
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

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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.

5. What are differences between fiscal policy and monetary policy?

fiscal policy monetary policy

- Tools: government spending & - Tools: Reserve requirement, Discount

taxation rates and open market operations

- control the government spending or - controls the money supply

taxation - supervised by the Central bank
- supervised by the Ministry of Finance - can be expansionary or restrictive

- can be expansionary or contractionary - Objectives are to manage inflation, to

- Objectives are to reduce reduce unemployment, to promote

unemployment; to promote economic moderate long-term interest rates.
growth, to control inflation.

6. What factors should be considered when making decisions on fiscal policy?

Why?

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When making decisions on its fiscal policy, the Government should consider a
number of factors, consisting of inside factors and outside factors.
Firstly, internal factors include economic factors such as economic growth rate,
unemployment rate and inflation rate. Moreover, the government also needs to
consider non-economic factors as well, for example, political consideration.
Secondly, external factors may have a great influence of the fiscal policy of a
country. For example, fiscal policies of other countries may tempt multinational
corporations to relocate their subsidiaries due to that countries’ generous tax
programs. Other factors can be requirements of the International Monetary Fund
(IMF), which often grants aid packages subject to conditions relating to fiscal policy.

UNIT 4: MONETARY POLICY

1. What is the monetary policy?
Monetary policy which controls a nation’s money supply is supervised by each
country’s Central Bank.
2. What are the objectives (or goals) of monetary policy?
The objectives of monetary policy are to promote economic growth and to keep
inflation under control.
3. What are main tools of monetary policy?
The main tools of monetary policy are reserve requirements, discount rates and open
market operations.
4. What is reserve requirement?
Reserve requirement is a certain percentage of deposits that the Central bank requires
other banks to keep in reserve.
Or
The reserve requirement set by the Central bank is the minimum amount of reserves
as banks must have.
5. What is the role of reserve requirements?
The reserve requirements play a central role in how much money banks have to lend
out.
6. How can the Central bank make changes to the money supply by changing
reserve requirements?
By changing reserve requirements, the Central bank can increase or decrease the
money supply.
7. What happens if the Central bank increases the reserve requirement?
If the Central increases the reserve requirement, it contracts the money supply; banks
have to keep more in reserve so they have less money to lend out.
8. What happens if the Central bank reduces the reserve requirement?
If the Central bank reduces the reserve requirement, it expands the money supply;

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banks have to keep less in reserve so they have more money to lend out.
9. What is the discount rate?
The discount rate is the rate of interest the Central bank charges on loans that it makes
to other banks.
10. What happens if the central bank increases the discount rate?
If the central bank increases the discount rate, it contracts the money supply.
11. What happens if the central bank reduces the discount rate?
If the central bank reduces the discount rate, it expands the money supply.
12. What will happen if the Central banks buy government securities?
If the Central banks buy government securities, the money supply will increase.
13. What will happen if the Central banks sell government securities?
If the Central banks sell government securities, the money supply will decrease.
14. What are open market operations?
Open market operations refer to the buying and selling of government securities by
the Central Bank on the open market.
15. What is a deposit?
A deposit is a sum of money which is in a bank account or savings account,
especially a sum which will be left there for some time.
16. How can banks encourage people to borrow and spend more money?
Banks can encourage people to borrow and spend more money by offering lower
interest rates or easier approvals.
17. How can banks restrict people to borrow and spend less money?
Banks can restrict people to borrow and spend less money by offering higher interest
rates or more difficult approvals.
18. Under what circumstance should monetary policy be expansionary?
Monetary policy should be expansionary when unemployment is high or economic
growth is low
19. Under what circumstance should monetary policy be restrictive?
Monetary policy should be restrictive when inflation is too high.
20. What is expansionary monetary policy?
Monetary policy is expansionary when the Central bank reduces reserve requirements
or discount rates or buys more government securities.
21. What is restrictive monetary policy?
Monetary policy is restrictive when the Central bank increases reserve requirements
or discount rates or sells more government securities.
22. Who are depositors of a bank?
A bank's depositors are the people who have accounts with that bank.
23. What are objectives of expansionary monetary policy?
The objectives of expansionary monetary policy are to promote economic growth and
create more jobs.
23. What is the objective of restrictive monetary policy?
The objectives of restrictive monetary policy are to reduce inflation.

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24. What can banks do if they are short of reserves?
If they are short of reserves, banks can borrow money from their bank (the Central
bank).

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.

3. What are major objectives of monetary policy in general? How should the
central bank conduct monetary policy to achieve these objectives
In general, the major objectives of monetary policy are to promote economic growth
rate or to reduce unemployment rate or to reduce inflation rate. In order to promote
economic growth rate or to reduce unemployment rate, the central bank conducts an
expansionary monetary policy by reducing RR or DR, or to buy government bonds.
In order to reduce inflation rate, the central bank conducts a restrictive monetary
policy by increasing RR or DR, or to sell government bonds.

UNIT 5: Financial Markets

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1. Based on types of financial instruments, how are securities markets classified?
- They are classified into equity markets and debt markets
2. What are equity markets?
- Equity markets are the markets in which equity instruments (shares) are traded
3. What are equity instruments?
- Equities are shares of companies
4. What are debt markets?
- Debt markets are the markets in which debt instruments (công cụ nợ) are
traded
5. What are debt instruments?
- Debt instruments can be bonds or mortgages and so on.
6. What are short-term debt instruments?
- They are instruments with the maturity of less than one year.
7. What are long-term debt instruments?
- They are instruments with the maturity of more than 10 years.
8. What are intermediate-term debt instruments?
- They are instruments with the maturity from 1 to 10 years.
9. What are benefits for the creditors of a company?
- They receive fixed amounts of money including interest and principal
payments at regular intervals until the maturity date.
10. Can creditors intervene/ interfere in the company’s operations? Why?
- No, because the creditors have no right to vote on any issues of the company.
11. Why are equity instruments long-term securities?
- Because they have no maturity date.
12. What are benefits for the shareholders of a company?
- They receive dividends paid by the company and the likely rise in prices of
shares.
13. How can shareholders get back their money?
- They can get back their money by selling their shares to someone else in the
securities markets.
14. Can shareholders intervene/ interfere in the company’s operations? Why?
- Yes, because the shareholders have the right to vote on issues important to the
firm and to elect its directors.
15. Based on functions of the markets, how are securities markets classified?
Based on functions of the markets, securities markets are classified into primary
markets and secondary markets.
16. What are primary markets?
- They are the markets in which fresh securities are issued and sold to initial
buyers.

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17. Who can be initial buyers?
- They can be investment banks who underwrite fresh securities.
18. Can private investors access to information of the primary markets? Why?
- No, they can’t. The information in primary markets is confidential and fresh
securities are only sold to initial buyers.
19. How are primary markets important to issuers?
Or: What is the role of primary markets?
- Primary markets help issuers (government agencies or corporations) to raise
more funds (by issuing fresh securities)
20. What are secondary markets?
- They are markets in which outstanding securities are traded
21. How are secondary markets important to issuers?
Or: What is the role of secondary markets?
- Although these markets don’t help issuers to raise more funds, they make
securities more liquid and desirable.
22. What types of markets are more popular for private investors? Why?
- Secondary markets are more popular because they can buy or sell (trade)
outstanding securities in secondary markets, but not in primary markets.
23. Based on operations of the markets, how are secondary markets classified?
- Based on operations of the markets, secondary markets are classified into
Exchanges and OTC markets.
24. Based on the maturity of financial instruments, how are securities markets
classified?
- Based on the maturity of financial instruments, securities markets are classified into
money markets and capital markets
25. What are money markets?
- The money market is a financial market in which only short-term debt instruments
are traded.
26. What are capital markets?
- The capital market is the market in which longer-term debt instruments and equity
instruments are traded.
27. What does the term “maturity” mean?
Maturity is the time when an investment or insurance will be paid back.
28. What does the term “mortgage” mean?
Mortgage is an agreement under which a person borrows money to buy property, esp.
a house, and the lender may take possession of the property if the borrower fails to
repay the money.

QUESTIONS FOR TOPICS

1. How do debt markets operate?

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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,
include interest and principal payments until 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?

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Exchanges are the securities markets in which transactions are made/ undertaken in a
single location and during fixed hours. Only securities of listed companies – large
companies which satisfy the requirements of listing are traded in Exchanges.

Whereas, OTC markets are the markets in which transactions are made via means of
communication and throughout the day. These brings opportunities to buy and sell
securities of small and medium-sized companies who cannot be listed in the
Exchanges.

6. What are differences between Money markets and Capital markets?

Money markets are the markets in which only short-term debt instruments, (with the
maturity of a year or less) are traded.

Capital markets are markets in which long-term debt instruments and equity
instruments are traded.

Short-term debt instruments are more liquid, so they are safer to invest than
instruments of capital markets.

UNIT 6: FOREX
1. What is foreign exchange market (Forex)?
F.E.M is the market in which national currencies are exchanged.
2. Based on the operation of the markets, how are financial markets classified?
Based on the operation of the markets, financial markets can be divided into OTC
markets and organized markets.
3. What does OTC stand for?
OTC stands for “over the counter”
4. What is an OTC (over-the-counter) market?
What are features of an OTC market?
An OTC market is the market which hasn’t got fixed hours or a physical meeting
place. in which transactions are made via communication instruments such as
telephone or computer link
5. What is an organized market?
An organized market is the market with fixed hours (called trading sessions – phiên
giao dịch), and a physical place (called trading floors – sàn giao dịch)
6. What is exchange rate?
Exchange rate is the rate at which the currency of one country or region can be
exchanged for that of another country or region.
7. What are different types of transactions in a foreign exchange market?
2 types of transactions in Forex are spot transactions and forward transactions

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8. What are spot transactions?
Spot transactions are undertaken for an actual exchange of currencies 2 business days
(working days) later.
9. What are forward transactions?
Forward transactions involve a delivery date further into the future.
10. What is the significance/ purpose of forward transactions?
Forward transactions help to protect the value of anticipated flows of foreign
currencies from exchange rate volatility.
11. What is one of reasons for the developments of the Forex?
- The development of world trade
- The expansion of international capital flows.
12. What is one of the reasons why London is the largest foreign exchange center
in the world?
- the large volume of international financial business is generated in London.
Or
- because of London’s geographic location.
13. What is international financial business generated in London?
International financial business generated in London include insurance, Eurobonds,
banking and so on
14. What helps London to trade with many cities in the whole world easily?
The geographical location of London enables it to trade with many cities in the world
easily. (London is situated in Greenwich Mean)
15. What are different types of participants in the foreign exchange market?
There are 4 types of participants in Forex: the market maker, dealers, customers and
brokers.
16. Who is a participant?
Participant is a person who takes part in or becomes involved in a particular activity.
17. Who is the market maker?
The market maker is the central bank of each country
18. What is the role of the market maker in Forex?
They establish the market and supervise the market operations by quoting the frame
of exchange rates at any time.
19. Why do market makers have to quote the frame of exchange rates at any
time?
Because exchange rates (prices of currencies) are influenced by demand and supply
of currencies in the international market.
20. Who are dealers in Forex?
They are banks and some other organizations
21. How do dealers participate in Forex?
They buy or sell foreign currencies on their own accounts.

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22. What purposes do dealers participate in Forex for?
They participate in Forex to make profits based on the differences between buying
rates (bid rates) and selling rates (offer rates).
23. Who are customers in Forex?
Customers can be multinational corporations, importers and exporters, and
individuals.
24. For what purposes do multinational corporations participate in Forex?
Multinational corporations have demand of foreign currencies for the acquisition of
financial and real assets between parents companies and their subsidiaries.
25. For what purposes do importers and exporters participate in Forex?
Importers and exporters have demand of foreign currencies for making or receiving
payments for imports/ exports.
26. For what purposes do individuals participate in Forex?
Individuals may demand foreign currencies for their trips abroad, or for the purpose
of saving.
27. Who are brokers in Forex?
The brokers are specialist companies who act as consultants for both banks and
customers
28. How do brokers participate in Forex?
They give advice on exchange rates for their customers.
29. What purposes do brokers participate in Forex for?
They charge commission for their consultancy.
30. What are bid rates (buying rates)?
Bid rate (buying rate) is the rate at which the bank will pay you when you go to it to
sell a foreign currency.
What are offer rates/ selling rates?
Offer rate/ selling rate is the rate at which the bank sells you a foreign currency.
31. What does the term “transaction” mean?
A transaction is a piece of business, for example an act of buying or selling
something.
32. What does the term “volatility” mean?
Volatility is the quality or state of being likely to change suddenly, especially by
becoming worse:

TOPIC:
1. 4 participants in the Forex market?

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 - The market maker is the central bank of each country. They establish the
market and supervise the market operations by quoting the frame of exchange
rates at any time.
- Dealers They are banks and some other organizations. They buy or sell foreign
currencies on their own accounts. They participate in Forex to make profits
based on the differences between buying rates and selling rates
- Customers can be multinational corporations, importers and exporters, and
individuals. They require foregn current for trade or investment.
- The brokers are specialist companies who act as consultants for both banks
and customers. They give advice on exchange rates for their customers. They
charge commission for their consultancy

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