Part 1: Theories and realities of Vietnam

1. International Monetary System Introduction

The International Monetary System (IMS) is a set of rules and institutions that govern the
exchange of currencies between countries. It is important for Vietnam to understand the IMS
because it plays a key role in the country's economic development.
Theories of the International Monetary System
There are two main theories of the IMS: the Bretton Woods system and the flexible exchange
rate system.
The Bretton Woods system was established in 1944 and was based on the US dollar as the
world's reserve currency. Under this system, all other currencies were pegged to the US
dollar, which was in turn pegged to gold. This system helped to stabilize exchange rates and
promote global trade.
The flexible exchange rate system was adopted in 1971 and allows currencies to fluctuate
freely in response to market forces. This system is more flexible than the Bretton Woods
system, but it can also be more volatile.
Realities of the Vietnam-International Monetary System
Vietnam has adopted a flexible exchange rate system with a managed float. This means that
the government intervenes in the foreign exchange market to prevent sharp fluctuations in the
Vietnamese dong. The government's goal is to maintain a stable exchange rate that is
conducive to economic growth.
Challenges and Opportunities
Vietnam faces a number of challenges in its relationship with the IMS. One challenge is the
country's reliance on foreign trade. This makes Vietnam vulnerable to fluctuations in global
demand and exchange rates. Another challenge is the country's large foreign debt. This debt
makes Vietnam vulnerable to financial crises.
However, Vietnam also has a number of opportunities in its relationship with the IMS. The
country is experiencing rapid economic growth and is becoming increasingly integrated into
the global economy. This presents Vietnam with opportunities to attract foreign investment
and expand its export markets.
Recommendations
Vietnam can take a number of steps to strengthen its relationship with the IMS. These steps
include:
Promoting economic growth and diversification: Vietnam should continue to pursue policies
that promote economic growth and diversification. This will help to reduce the country's
reliance on foreign trade and make it more resilient to external shocks.
Managing foreign debt: Vietnam should continue to manage its foreign debt prudently. This
will help to reduce the country's vulnerability to financial crises.
Strengthening financial institutions: Vietnam should continue to strengthen its financial
institutions. This will make the country's financial system more stable and resilient.
Participating in international financial institutions: Vietnam should continue to participate in
international financial institutions. This will help the country to influence the development of
the IMS and promote its own interests.
Conclusion
Vietnam is a dynamic and developing economy that is increasingly integrated into the global
economy. The IMS plays a key role in Vietnam's economic development. By understanding
the theories and realities of the IMS, Vietnam can take steps to strengthen its relationship
with the IMS and promote its own economic interests.
2. Foreign Exchange Rate Introduction
The foreign exchange rate is the price of one currency expressed in terms of another currency.
It is a key determinant of a country's international competitiveness and trade flows. Vietnam's
foreign exchange rate policy is an important component of the country's macroeconomic
policy framework.
Theories of Foreign Exchange Rate Determination
There are two main theories of foreign exchange rate determination: the purchasing power
parity (PPP) theory and the uncovered interest parity (UIP) theory.
The PPP theory states that exchange rates should adjust over time to equalize the prices of
goods and services in different countries. According to this theory, changes in the exchange
rate should reflect changes in relative inflation rates between countries.
The UIP theory states that the expected return on an investment in a foreign currency should
be equal to the expected return on an investment in the domestic currency. According to this
theory, the difference between interest rates in two countries should be equal to the expected
change in the exchange rate between the two currencies.
Realities of Vietnam's Foreign Exchange Rate Regime
Vietnam has adopted a flexible exchange rate regime with a managed float. This means that
the government intervenes in the foreign exchange market to prevent sharp fluctuations in the
Vietnamese dong. The government's goal is to maintain a stable exchange rate that is
conducive to economic growth.
Vietnam's Foreign Exchange Rate Policy
The State Bank of Vietnam (SBV) is responsible for formulating and implementing Vietnam's
foreign exchange rate policy. The SBV uses a variety of tools to manage the exchange rate,
including:
Open market operations: The SBV buys and sells foreign exchange in the open market to
influence the supply and demand of foreign currency.
Intervention in the foreign exchange market: The SBV can directly intervene in the
foreign exchange market to buy or sell foreign currency.
Foreign exchange reserve management: The SBV manages the country's foreign exchange
reserves, which can be used to intervene in the foreign exchange market.
Challenges and Opportunities
Vietnam faces several challenges in managing its foreign exchange rate. One challenge is the
country's reliance on foreign trade. This makes Vietnam vulnerable to fluctuations in global
demand and exchange rates. Another challenge is the country's large foreign debt. This debt
makes Vietnam vulnerable to financial crises.
However, Vietnam also has a number of opportunities in managing its foreign exchange rate.
The country is experiencing rapid economic growth and is becoming increasingly integrated
into the global economy. This presents Vietnam with opportunities to attract foreign
investment and expand its export markets.
Recommendations
Vietnam can take several steps to strengthen its foreign exchange rate management.
These steps include:
Promoting economic growth and diversification: Vietnam should continue to pursue
policies that promote economic growth and diversification. This will help to reduce the
country's reliance on foreign trade and make it more resilient to external shocks.
Managing foreign debt: Vietnam should continue to manage its foreign debt prudently. This
will help to reduce the country's vulnerability to financial crises.
Strengthening financial institutions: Vietnam should continue to strengthen its financial
institutions. This will make the country's financial system more stable and resilient.
Developing a robust foreign exchange market: Vietnam should continue to develop its
foreign exchange market. This will make it easier for businesses and investors to hedge
against exchange rate risk.
Conclusion
The foreign exchange rate is an important determinant of Vietnam's economic performance.
By understanding the theories and realities of the foreign exchange rate, Vietnam can take
steps to manage its exchange rate effectively and promote economic growth.
3. Foreign exchange market and development of foreign exchange market: The Foreign
Exchange Market in Vietnam
The foreign exchange market (forex market) is a decentralized global marketplace where
currencies are traded. It is the most liquid market in the world, with an estimated daily trading
volume of over $5 trillion. The forex market plays a vital role in facilitating international
trade and investment flows.
Vietnam's Foreign Exchange Market
Vietnam's foreign exchange market is a relatively young and developing market. However, it
has grown rapidly in recent years, driven by the country's rapid economic growth and
integration into the global economy. The forex market in Vietnam is primarily over-the-
counter (OTC), meaning that trades are conducted directly between counterparties. There is
also a small interbank market, where banks trade currencies with each other.
Theories of Foreign Exchange Market
There are two main theories of foreign exchange market: the efficient market hypothesis
(EMH) and the behavioral finance theory (BFT).
The EMH states that exchange rates are rational and reflect all available information. This
means that it is impossible to consistently beat the market by trading on fundamental analysis
or technical analysis.
The BFT states that exchange rates are not always rational and can be influenced by
psychological factors, such as herd behavior and overconfidence. This means that it may be
possible to beat the market by trading on behavioral biases.
Development of Vietnam's Foreign Exchange Market
The development of Vietnam's foreign exchange market has been supported by a number of
factors, including:
Economic reforms: Vietnam has implemented a number of economic reforms in recent years,
which have helped to liberalize the foreign exchange market.
Increased foreign investment: Vietnam has attracted a significant amount of foreign
investment in recent years, which has increased demand for Vietnamese dong (VND).
Development of financial infrastructure: Vietnam has developed its financial infrastructure,
including the establishment of a securities exchange and a derivatives market.
Challenges and Opportunities
Vietnam's foreign exchange market faces a number of challenges, including:
Market liquidity: The forex market in Vietnam is still relatively illiquid, which can make it
difficult to xecute large trades.
Exchange rate volatility: The VND is a volatile currency, which can make it difficult for
businesses to hedge against exchange rate risk.
Regulation: The forex market in Vietnam is still heavily regulated, which can make it difficult
for foreign banks to operate in the market.
Despite these challenges, there are also a number of opportunities for the development of
Vietnam's foreign exchange market.
These opportunities include:
Growth of the Vietnamese economy: The Vietnamese economy is expected to continue to
grow in the coming years, which will increase demand for VND.
Increased integration into the global economy: Vietnam is becoming increasingly integrated
into the global economy, which will increase demand for VND.
Development of new financial products: The development of new financial products, such as
foreign exchange options and futures, will make it easier for businesses to hedge against
exchange rate risk.
Recommendations
Vietnam can take a number of steps to further develop its foreign exchange market,
including:
Continue to liberalize the foreign exchange market: Vietnam should continue to liberalize the
foreign exchange market to make it more open and transparent.
Develop the financial infrastructure: Vietnam should continue to develop its financial
infrastructure, including the establishment of a central counterparty clearinghouse.
Promote the use of foreign exchange derivatives: Vietnam should promote the use of foreign
exchange derivatives to help businesses hedge against exchange rate risk.
Strengthen regulatory oversight: Vietnam should strengthen regulatory oversight of the
foreign exchange market to ensure that it is well-functioning and stable.
Conclusion
The foreign exchange market plays a vital role in the Vietnamese economy. By continuing to
develop its foreign exchange market, Vietnam can further integrate into the global economy
and promote economic growth.
4. Impact of foreign exchange rate on activities: Impact of Foreign Exchange Rate
on Vietnam's Activities
The foreign exchange rate (FX rate) plays a significant role in influencing various economic
activities in Vietnam. Changes in the FX rate can have both positive and negative
consequences for businesses, individuals, and the overall economy.
Exports:
Appreciation (stronger Vietnamese Dong (VND) vs. foreign currency): This can make
Vietnamese exports less competitive in the global market as their prices become relatively
higher for foreign buyers.
Depreciation (weaker VND): Conversely, a weaker VND can boost exports as Vietnamese
goods become cheaper for foreign buyers.
Imports:
Appreciation (stronger VND): This benefits importers as they can buy foreign goods at a
lower cost in VND terms.
Depreciation (weaker VND): This makes imports more expensive for Vietnamese businesses
and consumers.
Impact on Businesses
Exporting: A depreciating Vietnamese dong (VND) benefits exporters by making their
products more competitive in international markets. This can lead to increased export
volumes and revenue.
Importing: An appreciating VND makes imports cheaper, which can reduce production costs
for businesses that rely on imported inputs. However, it can also make domestic products less
competitive against imported goods.
Borrowing in Foreign Currency: Businesses that borrow in foreign currency face increased
costs if the VND depreciates, as they need to pay more VND to repay the debt.
Investment: A stable FX rate provides a more predictable environment for foreign investment,
encouraging businesses to invest in Vietnam.
Impact on Individuals
Tourism: A depreciating VND makes Vietnam more affordable for foreign tourists,
potentially boosting tourism revenue.
Remittances: Vietnamese workers abroad send remittances back home in foreign currency. A
depreciating VND increases the value of these remittances in VND terms.
Travel and Education: A depreciating VND makes travel and education abroad more
expensive for Vietnamese individuals.
Impact on the Economy
Economic Growth: A stable and competitive FX rate supports economic growth by
facilitating trade and investment.
Inflation: FX rate fluctuations can contribute to inflation, especially if the VND depreciates
significantly.
External Debt: Vietnam has a significant amount of external debt denominated in foreign
currency. A depreciating VND increases the debt burden in VND terms.
Managing the Impact of FX Rate Fluctuations
The Vietnamese government and businesses can adopt various strategies to manage the
impact of FX rate fluctuations:
Hedging: Businesses can use financial instruments like derivatives to hedge against FX risk.
Diversification: Businesses can diversify their export markets to reduce reliance on a single
currency.
Risk Management: Businesses can develop robust risk management strategies to proactively
address FX-related risks.
Policy Interventions: The government can implement monetary and fiscal policies to stabilize
the FX rate.
Conclusion
The FX rate plays a crucial role in shaping Vietnam's economic landscape. Understanding the
impact of FX rate fluctuations on businesses, individuals, and the overall economy is
essential for effective decision-making and risk mitigation strategies. By managing FX risk
effectively, Vietnam can foster a more resilient and competitive economy.

1 . Analyze the factors that impact on the trade balance . Current status of the trade
balance in Vietnam .
Bản giải 1:
1.Inflation: Inflation increases prices and costs. As prices and costs in any country rise
rapidly, domestically produced goods soon become more expensive than similar goods
produced abroad. This reduces exports, increases imports. Thereby affecting the balance of
trade.
2.Commodity prices: When the prices of domestic goods are high relative to foreign goods,
the demand for imports will increase, which affect the balance of trade
3.Productivity : An increase in domestic productivity will lead to more competition for
domestic goods than for imports, thereby increasing the demand for domestic goods and
reducing the demand for imported goods. Thereby affecting the balance of trade.
4.Exchange rate: An appreciation of the domestic currency significantly increases the cost of
exported goods, so the quantity of exports will decrease and affect the trade balance.
5. Trade policy: Trade barriers or supportive policies also affect a country's balance of exports
and imports. For example, when there is an export subsidy, a country will export more and
affect the balance of trade.
6. Income : Increased income increases the demand for goods, including imported goods.
This causes a country to import more and affects the balance of trade.
2023:
Vietnam achieved a trade surplus for the eighth consecutive year, reaching an estimated
US$26 billion in 2023, three times higher than in 2022, marking a record level in many years.
The Ministry of Industry and Trade (MoIT) reported that the total import-export turnover in
2023 is estimated at $683 billion, with exports totaling $354.5 billion and imports at $328.5
billion. The trade surplus contributed to an increase in foreign exchange reserves and
stabilization of the exchange rate and other macroeconomic indicators.
Despite facing challenges in import and export activities throughout the year, Vietnam's
exports—one of the three key pillars of economic growth alongside investment and
consumption—rebounded in the last seven months of the year, following a sharp decline in
the first quarter of 2023. From July to December, export values exceeded $30 billion each
month, indicating a return to growth momentum.
To drive exports, Vietnam implemented various trade promotion strategies and leveraged free
trade agreements (FTAs) to maintain key markets, achieving its 2023 export targets. Notable
bright spots were in fruit, vegetable, and rice exports, demonstrating a strong business
recovery and market expansion.
The Ministry of Agriculture and Rural Development estimated that agricultural, forestry, and
fishery export value in 2023 would reach over $53 billion, representing 96.3 percent of the
initial target set by the Prime Minister at the beginning of the year. The agriculture sector's
trade surplus is expected to be over $11 billion, accounting for over 42.5 percent of Vietnam's
total trade surplus.
Rice exports have also been a standout success. As of December, Vietnam exported more than
7.9 million tonnes of rice, valued at over $4.5 billion, representing a significant increase in
both volume and value compared to the same period in 2022. Experts predict that rice exports
in 2023 could reach 8.2 million tonnes worth almost $4.8 billion, the highest level since
Vietnam began exporting rice in 1989.
Similarly, the Vietnam Fruit and Vegetable Association forecasts that fruit and vegetable
exports in 2023 will reach $5.6 billion, an industry record, surpassing the initial target by 40
percent and marking a 66 percent increase from 2022. This success is driven by key products
like durian, which has seen rapid growth due to Vietnam's efforts to promote official export to
China.
However, the trade surplus also reflects a reduction in imports, indicating ongoing difficulties
for enterprises dependent on imported components and raw materials for production. To
address these challenges, Vietnam aims to increase the localization rate and embrace high
technology for more sustainable development in exports. The MoIT plans to promote green
export solutions and work towards resolving the European Union's yellow card warning for
seafood exports.
Additionally, Vietnam is exploring new markets and trade partnerships to diversify products
and supply chains. This includes new FTAs with the United Arab Emirates (UAE) and
MERCOSUR, and ongoing negotiations with China to expand market access for other
Vietnamese fruit and vegetable products such as green-skinned grapefruit, fresh coconuts,
avocados, pineapples, star apples, lemons, and melons. These efforts aim to strengthen
Vietnam's export resilience and broaden its reach in the global market.
Bản 2:
Factors impacting Vietnam's trade balance:
Global factors:
Economic growth of trading partners: A strong global economy boosts demand for
Vietnamese exports, leading to a trade surplus. Conversely, a weak global economy dampens
demand and creates a trade deficit.
Commodity prices: Fluctuations in global commodity prices, especially for Vietnam's key
exports like oil and gas, can significantly impact the trade balance.
Exchange rates: A weaker Vietnamese dong (VND) makes exports cheaper and imports more
expensive, potentially improving the trade balance. Conversely, a stronger VND has the
opposite effect.
Trade policies: Trade agreements and protectionist measures by other countries can affect
Vietnam's export competitiveness and impact the trade balance.
Domestic factors:
Domestic production capacity: Strong domestic production of goods for export can lead to a
trade surplus. Conversely, reliance on imports creates a trade deficit.
Foreign direct investment (FDI): FDI inflows can boost export capacity and technology
transfer, leading to a trade surplus. However, FDI can also increase imports of machinery and
equipment, contributing to a deficit.
Government policies: Government policies like export subsidies, import tariffs, and
infrastructure development can influence the trade balance.
Consumer preferences: A preference for imported goods over domestic alternatives can widen
the trade deficit.
Current status of Vietnam's trade balance:
Trade deficit: As of October 2023, Vietnam has a trade deficit. This is due to faster import
growth (around 10%) compared to export growth (around 5%).
High import of input materials: Imports of raw materials, machinery, and equipment for
production are growing rapidly, indicating economic recovery and export potential.
Concerns about consumer goods: While imports of consumer goods are rising, policymakers
are concerned about potential harm to domestic production competitiveness.
Overall, Vietnam's trade balance is a complex interplay of global and domestic factors. While
the current deficit raises concerns, the strong growth in imports for production suggests
potential future export gains. The government needs to address the consumer goods import
issue and implement policies to support domestic production and export competitiveness.
Bản 3:
Factors impacting Vietnam's trade balance:
Internal factors:
Economic growth: Higher economic growth leads to greater demand for imports, potentially
causing a trade deficit.
Domestic production: Insufficient domestic production capacity for certain goods increases
reliance on imports.
Domestic consumption: High demand for imported consumer goods can tilt the balance
towards a trade deficit.
Exchange rate: A weak Vietnamese dong (VND) makes imports more expensive and exports
cheaper, potentially improving the trade balance.
Government policies: Tax incentives or trade restrictions can influence the flow of imports
and exports.
External factors:
Global economic trends: Booming international markets increase demand for Vietnamese
exports, contributing to a trade surplus.
Commodity prices: Fluctuations in global commodity prices can impact the cost of imported
raw materials and finished goods.
Trading partner dynamics: The economic health of major import and export partners impacts
Vietnam's trade balance.
Global trade agreements: Free trade agreements can increase trade volume, impacting the
balance depending on the type of goods traded.
Current status of the trade balance in Vietnam:
As of June 2023: Vietnam had a trade deficit of $4.75 billion.
Trend: In 2021, Vietnam transitioned from a trade surplus to a trade deficit for the first time
in several years.
Concerns: The growing trade deficit, especially for consumer goods, raises concerns about
long-term economic impacts.
Government response: The government is focusing on supporting domestic production,
diversifying exports, and attracting foreign investment to address the trade imbalance.
Conclusion:
Vietnam's trade balance is influenced by complex interactions between internal and external
factors. While a temporary trade deficit may not be alarming, prolonged imbalances can
negatively impact the economy. The government is proactively addressing the issue, but
continuous efforts are needed to achieve a sustainable trade balance.
2. Analyzing the structure of the current account balance of an open market economy.
The significance of the research problem for Vietnam in the current period.
The current account balance is a critical component of a country's balance of payments,
providing a snapshot of its economic interactions with the rest of the world. It encompasses
the trade in goods and services, income flows, and current transfers between a nation and its
global counterparts. Deciphering the structure of the current account balance involves delving
into its various subcomponents:
1.Trade Balance:
Represents the difference between a country's exports (goods sold to foreign countries) and
imports (goods bought from foreign countries).
A positive trade balance (surplus) indicates a net export of goods, meaning the country is
earning more foreign currency from exports than it spends on imports.
A negative trade balance (deficit) indicates a net import of goods, meaning the country is
spending more foreign currency on imports than it earns from exports.
2. Services Balance:
Captures the net trade in intangible services like tourism, transportation, financial services,
and telecommunications.
A positive services balance (surplus) indicates the country is exporting more services than it
imports, generating income from foreign sources.
A negative services balance (deficit) indicates the country is importing more services than it
exports.
3. Factor Income:
Reflects the net income received or paid on foreign investments and workers' remittances.
Income on foreign assets: This includes earnings from foreign investments like dividends,
interest on bonds, and rental income from property held abroad. A positive income balance
indicates the country is receiving more income from foreign investments than it pays out for
investments held by foreigners within the country.
Compensation of employees: This captures income Vietnamese workers earn abroad
(positive) and income foreign workers earn in Vietnam (negative).
4. Unilateral Transfers:
Represent unrequited transfers of money or goods between residents of different countries.
These are not repayments of loans or interest payments.
Examples include foreign aid grants, humanitarian assistance, and personal remittances sent
by Vietnamese citizens working abroad to their families back home (positive) or vice versa
(negative).
Significance for Vietnam in the Current Period
Analyzing the structure of the current account balance holds immense significance for
Vietnam in the contemporary era due to several compelling reasons:
Understanding Trade Competitiveness: The trade balance component reveals a country's
competitiveness in the global market for physical goods. A consistent surplus suggests a
strong export sector, while a large deficit might indicate a reliance on imports or a need to
boost export competitiveness.
Service Sector Importance: The services balance showcases the significance of a country's
service industry. A surplus in services can help offset a trade deficit and generate foreign
income. Analyzing this component can highlight areas for development in tourism,
technology, or other service sectors.
Investment Income: The factor income component reflects a country's role as a net creditor or
debtor. A surplus indicates the country earns more from its foreign investments than it pays
out to foreign investors holding domestic assets. Conversely, a deficit suggests the country is
a net debtor, paying out more investment income than it receives.
Role of Transfers: Unilateral transfers can influence a country's external financing. Worker
remittances, for instance, can be a significant source of income for developing countries.
Analyzing transfers can provide insights into a country's reliance on foreign aid or the role of
its expatriate population.
Overall Significance:
Analyzing the current account structure is essential for policymakers to formulate effective
economic strategies. It helps them assess:
Balance of Payments: The current account is a major component of the balance of payments,
which tracks all financial transactions between a country and the rest of the world. Analyzing
the structure helps understand a country's overall external position.
Exchange Rate Management: The current account balance can influence exchange rates. A
persistent surplus or deficit can put pressure on the exchange rate, and policymakers might
need to consider these factors when managing the exchange rate.
Economic Growth Strategies: Understanding the current account composition helps identify
areas to promote sustainable economic growth. For instance, a country with a trade deficit
might focus on boosting exports or import substitution.
3. Analyzing the role and basic operations of the forex market, on that basis, please
comment on the current situation of the foreign exchange market in Vietnam.
Short version:
The forex market is the global marketplace for trading currencies. It facilitates the exchange
of one currency for another and is used by individuals, businesses, and governments engaged
in international trade and investment. The basic operations of the forex market include spot
transactions, forward contracts, and currency swaps. Spot transactions are the immediate
exchange of currencies at the current market rate. Forward contracts are agreements to
exchange currencies at a future date at a predetermined rate. Currency swaps are the
exchanging of one currency for another with a commitment to reverse the exchange at a later
date.
The current situation of the foreign exchange market in Vietnam is influenced by a number of
factors, including the exchange rate policy of the State Bank of Vietnam, recent exchange rate
movements, global events, foreign exchange reserves, foreign investment, economic growth,
government policies, and market modernization.
Long version:
The Forex Market: A Comprehensive Overview
The foreign exchange market (forex market) is a global decentralized marketplace for trading
currencies, enabling individuals, businesses, and governments to engage in international trade
and investment. It is the largest and most liquid market in the world, with a daily trading
volume exceeding $6.6 trillion.
Role of the Forex Market
The primary role of the forex market is to facilitate the exchange of one currency for another.
This exchange is essential for international trade, as it allows businesses to pay and receive
payment for goods and services sold across borders. Additionally, investors use the forex
market to hedge against currency risk and speculate on future currency movements.
Basic Operations
The forex market is characterized by its over-the-counter (OTC) trading mechanism, meaning
that transactions occur directly between two parties without the need for an exchange. The
three main types of forex transactions are:
Spot Transactions: These involve the immediate exchange of currencies at the current market
rate.
Forward Contracts: These are agreements to exchange currencies at a predetermined rate on a
future date. This is used to hedge against currency risk.
Currency Swaps: These involve exchanging one currency for another with a commitment to
reverse the exchange at a later date.
Market Participants
The forex market is a diverse and complex ecosystem with a wide range of participants,
including:
Central Banks: These are responsible for setting monetary policy and regulating the financial
system. They use the forex market to intervene in the currency market and manage their
foreign exchange reserves.
Commercial Banks: These are the primary providers of forex services to individuals and
businesses. They facilitate currency exchange, provide hedging instruments, and offer margin
trading.
Corporations: These use the forex market to manage their foreign currency exposure and
facilitate international trade and investment.
Investment Funds: These use the forex market to speculate on currency movements and
diversify their portfolios.
Retail Traders: These are individuals who trade currencies in the hope of making a profit.
Current Situation of the Foreign Exchange Market in Vietnam
Việt Nam still has effective tools to proactively control the VNĐ/USD exchange rate in 2024
even if the US Federal Reserve (Fed) has to maintain its interest rates at the current high level
for an extended time due to the conflict in the Red Sea and other new uncertainties, experts
said.
In the domestic market, the State Bank of Vietnam (SBV)’s central rate of the Vietnamese
đồng against the dollar on February 16, 2024 was VNĐ 23,971. However, the average dollar
price on the unofficial market has exceeded VNĐ2 5,000 for the first time since October
2022 and although it has decreased slightly, it is currently still at a high level.
In fact, most of the increases in the VNĐ/USD exchange rate stemmed from the appreciation
of the greenback. In particular, geopolitical instability is always a catalyst for money to find
the dollar as a safe haven.
According to experts, the VNĐ/USD exchange rates are still likely to increase in the first half
of this year as the interest rate gap between dollar and đồng is still high. Rising pressure on
the exchange rate will reduce only when the dollar reaches its peak and the Fed lowers
interest rates.
Another factor that can affect the VNĐ/USD exchange rate in 2024 is geopolitical instability
in the world. The Red Sea conflict has had a negative effect on the world economy, making
economic recovery to a normal state more difficult due to increase in production costs, prices
and inflation.
In addition, the exchange rate also depends on domestic inflation. Overall, inflation in Việt
Nam is still under control. Overproduction and oversupply in both China and Việt Nam, amid
weak demand, are preventing prices from rising.
Recent gold or foreign currency fevers on the unofficial market are mainly speculative
activities. This is not a concern if the SBV continues to control inflation and is not too hasty
in lowering deposit interest rates. It will not affect macroeconomic stability
Conclusion
The forex market is a dynamic and complex global marketplace that plays a critical role in
international trade and investment. Understanding the role, operations, and current state of
the forex market is essential for businesses, investors, and policymakers operating in a
globalized economy.
Another ver :):
Role and Basic Operations of the Forex Market Role of the Forex Market:
Facilitating Currency Exchange: The forex market is the global marketplace for trading
currencies. Its primary role is to facilitate the exchange of one currency for another, serving
individuals, businesses, and governments engaged in international trade and investment.
Basic Operations:
Spot Transactions: Immediate exchange of currencies at the current market rate. These
transactions occur "on the spot."
Forward Contracts: Agreements to exchange currencies at a future date at a predetermined
rate, which helps manage currency risk.
Currency Swaps: Exchanging one currency for another with a commitment to reverse the
exchange at a later date.
Market Participants: Include central banks, commercial banks, corporations, investment
funds, and retail traders. They engage in buying and selling currencies to meet various
objectives.
Current Situation of the Foreign Exchange Market in Vietnam
The current situation of the foreign exchange market in Vietnam is influenced by various
factors:
Exchange Rate Policy: Vietnam's State Bank (SBV) manages the exchange rate through a
managed float regime. The SBV allows the VND (Vietnamese Dong) to fluctuate within a
controlled range, adjusting it as needed to support the country's economic objectives.
Recent Exchange Rate Movements: In recent years, Vietnam has experienced relatively stable
exchange rates, with gradual depreciation of the VND against the USD. This stability has
contributed to confidence in the currency.
Impact of Global Events: Global events, such as the COVID-19 pandemic and trade tensions,
can affect Vietnam's foreign exchange market. For instance, the pandemic disrupted supply
chains and affected trade flows.
Foreign Exchange Reserves: Vietnam has been accumulating foreign exchange reserves,
which provide a buffer against currency volatility and help stabilize the VND.
Foreign Investment: Foreign direct investment (FDI) inflows have a direct impact on the
foreign exchange market. Vietnam's attractiveness to foreign investors can influence the
demand for VND.
Economic Growth: Vietnam's strong economic growth and export performance have
contributed to its foreign exchange market stability.
Government Policies: Government policies related to trade, investment, and currency
management play a significant role in the foreign exchange market's current situation. Market
Modernization:Vietnam has witnessed the modernization of its foreign exchange market, with
increased use of digital platforms for forex trading and transactions.
4. Discuss your opinions about the market for foreign exchange and its role in the
development of the economy. Analyze the impact of the Vietnam foreign exchange
market on the development of Vietnam's economy in the last 5 years.
The Foreign Exchange Market: Engine of Growth or Double-Edged Sword?
The foreign exchange (FX) market, where currencies are traded, plays a critical role in the
global economy, acting as a facilitator of trade and investment. Its impact on individual
economies, like Vietnam, can be multifaceted, promoting growth while also introducing
potential risks.
Functions of the Foreign Exchange Market:
Facilitates International Trade: Businesses need to convert their currencies to buy and sell
goods and services across borders. The forex market enables this currency exchange, making
international trade possible.
Price Discovery: The forex market constantly determines exchange rates based on supply and
demand for different currencies. This helps businesses understand the relative value of their
exports and imports, making informed decisions.
Transfer of Funds: The forex market allows for the transfer of funds between countries for
various purposes, like foreign investment, international aid, and tourism.
Risk Management: Businesses and investors can use the forex market to hedge against
currency fluctuations, protecting themselves from unexpected changes in exchange rates.
Impact on Economic Development:
Promotes Exports: A stable or slightly weaker domestic currency can make a country's
exports cheaper in the global market, potentially leading to increased export volume and
revenue. This contributes to economic growth.
Attracts Foreign Investment: A stable and efficient forex market with limited volatility is
attractive to foreign investors. This can lead to increased Foreign Direct Investment (FDI),
which creates jobs, transfers technology, and boosts economic activity.
Manages Inflation: A stable exchange rate can moderate inflation by preventing imported
goods from becoming excessively expensive. This helps maintain purchasing power and
consumer spending, which can stimulate economic growth.
Access to Foreign Capital: The forex market allows countries to access foreign capital
through borrowing or selling bonds in foreign currencies. This can be used to finance
infrastructure development, social programs, and other investments that support economic
growth.
Challenges and Considerations:
Exchange Rate Volatility: Excessive fluctuations in exchange rates can create uncertainty for
businesses and investors, hindering long-term planning and potentially discouraging
investment.
Currency Speculation: Speculative activity in the forex market can lead to artificial
fluctuations in exchange rates, potentially harming businesses and the broader economy.
Management of Foreign Exchange Reserves: Countries need to manage their foreign
exchange reserves effectively to maintain stability and intervene in the market when
necessary.
Vietnam's FX market in the last 5 years:
2019 - 2020: Positive Impacts:
Supported Export Growth (2019): In 2019, a relatively stable exchange rate, achieved partly
through SBV intervention, likely supported export growth. This contributed to Vietnam's
strong economic performance that year.
Attracted Foreign Investment (2019): A stable foreign exchange market with limited volatility
can be attractive to foreign investors. This could have contributed to higher Foreign Direct
Investment (FDI) inflows in 2019, which can create jobs, transfer technology, and stimulate
economic growth.
Moderated Inflation (2019-2020): A stable exchange rate can help control inflation, as
imported goods become less expensive. This likely helped moderate inflation in both 2019
and 2020.
Increased Foreign Exchange Reserves (2019): The SBV's successful intervention in 2019, as
discussed earlier, potentially increased Vietnam's foreign exchange reserves. This provided a
buffer against external economic shocks, which became crucial in 2020.
Negative Impacts
Export Challenges (2020): The global economic slowdown due to the COVID-19 pandemic
in 2020 significantly impacted global demand for Vietnamese exports. Even with a stable
exchange rate, export growth likely slowed down.
Pressure on the Dong (2020): Despite the SBV's efforts, the Vietnamese Dong (VND)
weakened slightly against the USD in 2020. This could have:
Increased Import Costs: Rising import costs could have put pressure on businesses and
potentially contributed to inflation.
Exchange Rate Uncertainty: Some businesses might have faced challenges due to exchange
rate fluctuations, making long-term planning difficult.
The supply of foreign currency in Vietnam is considered to be very abundant in 2019. The
SBV lowered the buying price (bid price) for USD from 25,000 VND/USD to 23,175
VND/USD.
- 2021: In the minds of Vietnamese people for a long time, VND only depreciated compared
to USD. In 2021, the VND went against the typical trend and actually strengthened against
the USD by around 2%. This defied expectations, as a strong USD globally usually leads to a
weaker VND. A stronger dong in 2021 will mean less pressure in terms of paying foreign
debts, reducing public debt as ratio of GDP, and a likely improvement in the balance of trade
with the U.S., taking the wind out of currency manipulation accusations. According to many
analysis, the current movement of foreign currency cash flow will help increase foreign
exchange reserves and also serve as a foundation and resource for the State Bank of Vietnam
to continue to operate proactively and flexibly in the future.
2022:
The weak local currency pulls up inflation in the EU, which requires Vietnamese businesses
to focus on increasing the competitiveness of export goods, creating a valuable difference for
their products. According to the State Bank of Vietnam (SBV), the VND has only depreciated
about 2.3 percent against the USD. The USD/VND exchange rate on August 12, as
announced by the SBV, was 23,153 VND. The dong remains one of the least depreciated
currencies in the Asia-Pacific region.
Exchange rate fluctuations since the beginning of the year impact Vietnam's trade activities.
If exporters benefit when the dollar appreciates, in the opposite direction, importers have to
pay an additional cost to offset the difference due to this fluctuation.
Based on the selling exchange rate of the SBV, from the beginning of the year to August 1,
one USD equals 23,400 VND, up 2.3 percent compared to the beginning of 2022. In the
opposite direction, the Vietnamese dong increases in value by about 8 percent against EUR.
The US and Europe (EU) are two important import-export markets of Vietnam, so exchange
rate fluctuations, especially the US dollar, have had a strong impact on the production and
business results of many businesses.Therefore, the fact that the Euro falling almost equal to
the USD means that the export value of each shipment decreases accordingly. Meanwhile,
profits fall as they are affected by input costs such as gasoline, raw material prices, and labor
costs that have all increased.
2023:
Positive Impacts:
Supported Strong Trade Surplus: Despite a global economic slowdown, Vietnam achieved a
record trade surplus in 2023 of $26 billion. A stable or slightly weaker VND compared to
major currencies like the USD can make Vietnamese exports more competitive in the global
market, potentially contributing to this surplus.
Maintained Foreign Investment: The foreign exchange market remained relatively stable in
2023, which can be attractive to foreign investors. This stability, coupled with Vietnam's
strong economic fundamentals, might have helped maintain Foreign Direct Investment (FDI)
inflows, creating jobs and boosting growth.
Moderated Inflation: Although external factors like rising global commodity prices
contributed to inflation in 2023, a stable exchange rate likely helped prevent further
inflationary pressures by keeping the cost of imported goods somewhat stable.
Negative Impacts:
Pressure on the Dong (VND): The VND weakened slightly against the USD in 2023 due to
several factors, including rising global interest rates set by the US Federal Reserve (Fed).
This could have:
Increased Import Costs: Rising import costs due to a weaker VND could have put pressure on
businesses and potentially contributed to inflation.
Exchange Rate Uncertainty: Some businesses might have faced challenges due to fluctuations
in the exchange rate, making long-term planning difficult.
5. Discuss your opinions about the Balance of Payment. Based on your knowledge about
Vietnamese’s balance of Payment, analyze and indicate its role in the economy.
The Balance of Payment: A Window into Vietnam's Economic Health
The Balance of Payment (BoP) is a crucial indicator of a country's external financial position,
capturing all economic transactions between residents and non-residents over a given period.
It's like a detailed financial statement, revealing a nation's trade, investment, and borrowing
activities with the outside world. Analyzing Vietnam's BoP offers valuable insights into its
economic health and vulnerabilities.
Components of Vietnam's BoP:Current Account: This reflects the net trade in goods and
services (exports minus imports) and income flows from abroad (e.g., dividends,
remittances). A surplus indicates Vietnam is earning more from the world than it spends,
while a deficit shows the opposite.
Capital Account: This captures foreign investments into Vietnam (FDI, portfolio investments)
and Vietnamese investments abroad. A positive capital account signifies an inflow of foreign
funds, while a negative indicates an outflow.
Financial Account: This covers short-term financial transactions like loans, credits, and
changes in reserve assets.
Role of Vietnam's BoP:
Trade engine: Historically, Vietnam has enjoyed a trade surplus, driven by strong exports of
manufactured goods like garments and electronics. This surplus fuels economic growth by
creating jobs, generating foreign exchange, and attracting investment.
Investment magnet: Vietnam's capital account has also been positive, reflecting significant
foreign direct investments (FDI) inflows. This FDI boosts productivity, technology transfer,
and infrastructure development, further strengthening the economy.
Debt management: Responsible borrowing and prioritizing productive investments in the
capital account are crucial to avoid excessive external debt burdens that could constrain
future growth.
Vulnerability to external shocks: Vietnam's dependence on trade and foreign investment
makes it vulnerable to external shocks like global trade slowdowns or financial market
turmoil. A sudden shift in the BoP can trigger currency depreciation, capital flight, and
economic instability.
Recent trends and concerns:
Widening trade deficit: While Vietnam still enjoys a trade surplus overall, recent years have
seen a concerning trend of widening trade deficit. This is due to faster import growth,
particularly of raw materials and machinery for production, raising concerns about
dependence on imported inputs.
Rising foreign debt: While FDI has contributed positively, excessive reliance on foreign
borrowing can lead to debt sustainability concerns. Balancing growth with responsible debt
management is crucial.
Policy implications:
Boosting export competitiveness: Policies promoting domestic production efficiency,
technological advancement, and diversification can strengthen export performance and
narrow the trade deficit.
Attracting high-quality FDI: Strategic FDI targeting high-tech sectors and export-oriented
industries can improve productivity and export potential while mitigating debt risks.
Developing the service sector: Enhancing Vietnam's service exports, like tourism and
financial services, can diversify the economy and contribute to a more balanced BoP.
Building resilience: Strengthening domestic financial markets, accumulating reserves, and
diversifying trading partners can help Vietnam weather external shocks and maintain BoP
stability.
Conclusion:
Vietnam's BoP plays a pivotal role in its economic growth and development. While
historically favorable, recent trends demand attention. By addressing vulnerabilities,
implementing sound policies, and diversifying its external linkages, Vietnam can leverage its
BoP for continued economic prosperity and enhanced resilience in the face of global
challenges.

International Monetary System

Theories:
Bretton Woods System:
Vietnam, like many other countries, participates in the post-World War II Bretton Woods
system. This system established the International Monetary Fund (IMF) and the World Bank,
which play roles in maintaining global economic stability and providing financial assistance
to countries in need.
Exchange Rate Management:
Theories related to exchange rate management play a crucial role. Vietnam may adopt
different exchange rate regimes, including fixed, floating, or managed floats, to stabilize its
currency and promote economic growth.
Open Economy Macroeconomics:
Vietnam's engagement in the international monetary system involves considerations of open
economy macroeconomics. This includes understanding the impact of international trade,
capital flows, and exchange rate movements on the country's economic performance.
Realities in Viet Nam
Exchange Rate Policies:
Vietnam has adopted a managed floating exchange rate system, where the State Bank of
Vietnam (SBV) intervenes in the foreign exchange market to maintain stability. The exchange
rate is influenced by market forces but subject to government interventions.
Trade Liberalization:
Vietnam has actively participated in global trade agreements, such as the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union-
Vietnam Free Trade Agreement (EVFTA). This reflects the country's commitment to trade
liberalization and integration into the global economy.
Foreign Exchange Reserves:
Vietnam maintains significant foreign exchange reserves, which serve as a buffer against
external economic shocks. These reserves provide stability to the country's currency and
facilitate international trade.
IMF Engagement: Vietnam has engaged with the International Monetary Fund (IMF) for
policy advice and financial support. The IMF has provided assistance to help Vietnam
address balance of payments challenges and implement economic reforms.
Global Economic Challenges:
Like other nations, Vietnam faces challenges arising from global economic uncertainties,
including fluctuations in commodity prices, changes in global demand, and financial market
volatility. These challenges necessitate adaptive policies and strategies.
Challenges and Opportunities
Vietnam faces several challenges in its engagement with the IMS, including:
1. Managing external shocks: Vietnam is vulnerable to external shocks, such as changes in
global financial conditions or fluctuations in commodity prices. These shocks can affect the
country's exchange rate and economic stability.
2. Developing domestic financial markets: Vietnam's domestic financial markets are still
relatively underdeveloped. This can limit the country's ability to absorb external shocks and
manage its exchange rate effectively.
Despite these challenges, Vietnam also has several opportunities in its engagement with the
IMS, including
1. Promoting regional financial cooperation: Vietnam can play a leading role in promoting
regional financial cooperation initiatives, such as the CMIM, which can help to strengthen
regional financial stability and crisis preparedness.
2. Developing domestic financial markets: Vietnam can continue to develop its domestic
financial markets, which will make the country more resilient to external shocks and
strengthen its ability to manage its exchange rate effectively.

Part 2: Multiple choice and questions:

1. Balance of Payment:
The knowledge system for multiple choice questions on the topic of Balance of Payment
includes the following content:
Definition of Balance of Payment: The Balance of Payment (BoP) is a statement of all
economic transactions between residents and non-residents of a country over a given period
of time. It is a comprehensive record of a country's international economic activity.
Components of Balance of Payment: The BoP is divided into three main accounts: o Current
Account: This account records the net flows of goods, services, income, and transfers
between residents and non-residents.
o Capital Account: This account records the net flows of financial assets between residents
and non-residents
o Financial Account: This account records the net flows of changes in official reserves and
other financial assets.
Balance of Payment Imbalance: A BoP imbalance occurs when the value of a country's
exports is not equal to the value of its imports. A surplus occurs when exports exceed imports,
and a deficit occurs when imports exceed exports.
Determinants of Balance of Payment Imbalances: There are many factors that can contribute
to a BoP imbalance, including:
o Economic growth: Economic growth can lead to an increase in imports as consumers and
businesses demand more goods and services from abroad.
o Exchange rates: Changes in exchange rates can affect the competitiveness of a country's
exports and imports.
o Government policies: Government policies, such as tariffs and subsidies, can also affect the
BoP.
Policy Implications of Balance of Payment Imbalances: BoP imbalances can have a number
of implications for a country's economy, including:
o Exchange rate volatility: BoP imbalances can lead to volatility in exchange rates, which can
make it difficult for businesses to plan for the future.
o Economic growth: BoP imbalances can have a negative impact on economic growth, as
they can lead to higher inflation and interest rates.
o Financial stability: BoP imbalances can increase the risk of financial instability, as they can
lead to a build-up of foreign debt.
Here are some examples of multiple choice questions on the topic of Balance of Payment:
Question 1: The Balance of Payment is a statement of:
o All economic transactions between residents and non-residents of a country over a
given period of time
o All financial transactions between residents and non-residents of a country over a
given period of time.
o All trade transactions between residents and non-residents of a country over a given
period of time.
The BoP encompasses not just trade, but also income flows, investments, and even changes in
official reserves.
Question 2: A BoP surplus occurs when:
o Exports exceed imports. o Imports exceed exports.
o Exports and imports are equal.
This defines a BoP surplus, meaning the country is earning more from the world than it
spends.
Question 3: Which of the following factors can contribute to a BoP deficit? o Economic
growt
o Exchange rate depreciation
o Government subsidies for exports o All of the above
All three options can contribute to a BoP deficit, though they impact it in different ways:
Economic growth: Increased demand for foreign goods and services can lead to higher
imports, pushing the BoP towards deficit.
Exchange rate depreciation: A weaker currency makes imports cheaper and exports more
expensive, potentially widening the trade deficit.
Government subsidies for exports: While intended to promote exports, subsidies can
artificially boost exports, masking underlying competitiveness issues and potentially leading
to future BoP challenges.
Question 4: Which of the following is an implication of a BoP deficit?
o Exchange rate volatility o Economic growth o Financial stability
Exchange rate volatility: BoP imbalances can trigger currency fluctuations, making trade and
investment uncertain for businesses.
Financial stability: Excessive deficits can lead to reliance on foreign borrowing, increasing
external debt and vulnerability to financial crises.
Remember, a BoP deficit doesn't necessarily mean doom and gloom. It's crucial to assess the
reasons behind the imbalance and implement appropriate policies to ensure long-term
sustainability and economic well-being.

2. Exchange rate and supply/demand of money

The knowledge system for multiple choice questions on the topic of Exchange Rate and
Supply/Demand of Money includes the following content:
Exchange Rate
O Definition: The exchange rate is the price of one currency in terms of another currency.
O Determinants: Exchange rates are determined by a number of factors, including:
Demand and supply: The demand for a currency is determined by the desire to hold that
currency for purposes such as trade, investment, or speculation. The supply of a currency is
determined by the amount of that currency that is available in the market.
Interest rates: Higher interest rates in a country make that country's currency more attractive
to investors, which can lead to an increase in the demand for that currency and an
appreciation of its value.
Inflation: Inflation can lead to a depreciation of a country's currency, as it makes that
currency less valuable in terms of goods and services.
Government policies: Government policies, such as exchange rate intervention, can also
affect exchange rates.
Supply/Demand of Money
O Definition: The supply of money is the total amount of money in circulation in an
economy. The demand for money is the amount of money that people and businesses want to
hold.
O Determinants of the supply of money: The supply of money is determined by a number of
factors, including:
Central bank policy: Central banks can control the supply of money by buying or selling
government bonds or other assets.
Bank lending: Banks can create money by lending to businesses and consumers.
Currency in circulation: The amount of currency in circulation is determined by the public's
demand for cash.
O Determinants of the demand for money: The demand for money is determined by a number
of factors, including:
Transactions demand: The transactions demand for money is the amount of money that
people and businesses need to hold to make everyday purchases.
Precautionary demand: The precautionary demand for money is the amount of money that
people and businesses hold to guard against unexpected expenses.
Speculative demand: The speculative demand for money is the amount of money that people
and businesses hold to take advantage of investment opportunities.
Relationship between exchange rates and supply/demand of money
o In a floating exchange rate system, the exchange rate is determined by the forces of
supply and demand. When the demand for a currency increases, the exchange rate will
appreciate. When the supply of a currency increases, the exchange rate will depreciate.
o In a fixed exchange rate system, the government intervenes in the foreign exchange
market to maintain the exchange rate at a predetermined level. The government can do this by
buying or selling its own currency.
Here are some examples of multiple choice questions on the topic of Exchange Rate and
Supply/Demand of Money:
Question 1: Which of the following will lead to an appreciation of a currency? o An
increase in the demand for the currency
o A decrease in the supply of the currency
o Both an increase in the demand and a decrease in the supply of the currency
An increase in demand for a currency means more people and businesses want to hold that
currency, leading to an appreciation. A decrease in supply means there is less of the currency
available, further pushing the price up.
Question 2: Which of the following will lead to a depreciation of a currency? o An
increase in the supply of the currency
o A decrease in the demand for the currency
o Both an increase in the supply and a decrease in the demand for the currency
An increase in supply makes the currency more readily available, putting downward pressure
on its value. Simultaneously, a decrease in demand means fewer people and businesses want
to hold the currency, further weakening its valuey
Question 3: Which of the following will lead to an increase in the demand for money?
o An increase in the level of income o An increase in the price level
o An increase in the interest rate
As people's incomes rise, they tend to hold more money to cover transactions and unforeseen
expenses, increasing the overall demand for money.
Question 4: Which of the following will lead to a decrease in the demand for money?
o A decrease in the level of income
o A decrease in the price level
o A decrease in the interest rate
When interest rates fall, holding money as a store of value becomes less attractive, prompting
people to convert their money into other assets, leading to a decrease in the demand for
money.
3. Foreign market
The knowledge system for multiple choice questions on the topic of Foreign Market includes
the following content:
Definition of Foreign Market: A foreign market is any market that is located outside of the
home country of a company.
Factors to Consider When Entering a Foreign Market: There are many factors to consider
when entering a foreign market, including:
o Cultural differences: Cultural differences can be a major challenge for companies entering
foreign markets. Companies need to be aware of the cultural norms and expectations of the
target market.
o Legal and regulatory environment: The legal and regulatory environment can vary
significantly from country to country. Companies need to understand the laws and regulations
that apply to their business in the target market.
o Economic conditions: The economic conditions of the target market can have a significant
impact on the success of a company. Companies need to assess the economic situation of the
target market before entering.
o Competition: The level of competition in the target market can be a major challenge.
Companies need to understand the competitive landscape before entering.
Entry Strategies: There are a number of different entry strategies that companies can use to
enter foreign markets, including:
o Exporting: Exporting is the process of selling goods or services to customers in another
country.
o Licensing: Licensing is the process of granting another company the right to use a
company's intellectual property, such as a trademark or patent, in exchange for a fee.
o Franchising: Franchising is a business model in which a franchisor grants a franchisee the
right to use its business model, trademarks, and other intellectual property in exchange for a
fee.
o Direct investment: Direct investment is the process of investing in a company in another
country.
Global Marketing Strategy: A global marketing strategy is a plan for how a company will
market its products or services to customers around the world.
International Trade: International trade is the exchange of goods and services between
countries.
Here are some examples of multiple choice questions on the topic of Foreign Market:
Question 1: Which of the following is NOT a factor to consider when entering a foreign
market?
o Cultural differences
o Legal and regulatory environment
o Economic conditions
o Exchange rates
While exchange rates play a crucial role in international trade and foreign market operations,
they are not a primary factor to consider when initially assessing the feasibility of entering a
foreign market. Cultural differences, legal and regulatory frameworks, economic conditions,
and competition are more fundamental aspects to evaluate before venturing into a new market
landscape.
Question 2: Which of the following is an example of exporting?
o A company in the United States sells its products to a company in Europe.
o A company in Japan licenses its technology to a company in China.
o A company in Brazil opens a retail store in Mexico.
o A company in India invests in a factory in Vietnam.
Exporting involves selling domestically produced goods or services to customers in another
country. In this case, the US company is exporting its products to a European company,
demonstrating the essence of cross-border trade.
Question 3: Which of the following is a key element of a global marketing strategy? o
Standardization of products and services
o Localization of products and services o Adaptation of products and services
o Customization of products and services
A global marketing strategy should consider tailoring products and services to suit the
preferences, cultural nuances, and regulatory requirements of each target market. Localization
involves adapting marketing messages, product features, and service offerings to resonate
with local consumers and comply with local regulations.
Question 4: Which of the following is an example of international trade?
o A company in the United States buys oil from a company in Saudi Arabia.
o A company in Japan sells its cars to a company in Europe.
o A company in Brazil exports its coffee to a company in the United States.
o All of the above
International trade encompasses the exchange of goods and services across national borders.
The examples provided accurately represent instances of international trade: oil importing
from Saudi Arabia, car exports from Japan to Europe, and coffee exportation from Brazil to
the United States.
4. Period of Monetary system
The knowledge system for multiple choice questions on the topic of Monetary System Period
includes the following content:
Concept of money: Money is a special commodity used as a medium of exchange, a means of
payment, a store of value, and a unit of account in the economy.
Types of money: Money can be classified according to different criteria, including: o By form
of existence: Money can exist in the form of metal money, paper money, electronic money,
etc.
o By value: Money can be divided into metal money with intrinsic value and paper money
with no intrinsic value.
o By function: Money can be divided into book money and physical money.
History of money development: Money has undergone many stages of development, from
metal money, paper money, electronic money, to book money.
Monetary systems: A monetary system is a set of regulations and mechanisms related to the
issuance, circulation, and use of money in a country. Monetary systems can be classified
according to different criteria, including:
o By ownership regime: Monetary systems can be divided into metallic monetary systems,
paper monetary systems, and book monetary systems.
o By exchange rate regime: Monetary systems can be divided into fixed exchange rate
systems, floating exchange rate systems, and managed exchange rate systems.
Here are some examples of multiple choice questions on the topic of Monetary System
Period:
Question 1: Money is:
o A special commodity
o A medium of exchange
o A means of payment
o All of the above
Money is a special commodity, with intrinsic or fiat value, that is used as a medium of
exchange, a means of payment, a store of value, and a unit of account in the economy.
Question 2: Intrinsic value metal money is:
o Money made of gold or silver
o Money with its own use value
o Money that can be converted into goods or services
Metallic money has intrinsic value because it can be used directly in production or
consumption.
Question 3: Metallic monetary system is:
o A monetary system based on metallic money as a measure of value
o A monetary system based on paper money as a measure of value
o A monetary system based on electronic money as a measure of value
A metallic monetary system is a monetary system in which metallic money is used as a
measure of value, meaning that metallic money has a value equal to the value of the goods or
services that it can purchase.
Question 4: Fixed exchange rate system is:
o A system in which the value of a currency against another currency is determined by
the government
o A system in which the value of a currency against another currency is determined by
the market
o A system in which the value of a currency against another currency is determined by a
central authority
A fixed exchange rate system is a system in which the value of a currency against another
currency is determined by the government and is maintained by government intervention
measures.
1. Singapore Company X 's foreign currency bonds issued to the U.S. market , worth $
100 million. How is it reflected in the international balance of payments of Singapore?
a) Credited in the balance of long-term capital
b ) Debited in the balance of long-term capital c ) Credited in the balance of short-term
capital
d ) Debited in the balance of unilateral current transfers
-Issuing foreign currency bonds is for the purpose of raising capital, in this case Singapore X
company collects $100 million, which increases Singapore's foreign currency resources and
will credit
2. Suppose the rate of inflation in the U.S.is higher than in Vietnam , this will affect
supply, demand , exchange rate of the VND :
a)Supply of VND will fall , demand of VND will increase , and VND’s value will increase
b ) Supply of VND will rise , demand of VND will decrease , and VND’s value will decrease
c ) Supply of VND will fall , demand of VND will increase , and VND’s value will decrease
d ) Supply of VND will rise , demand of VND will reduce , and VND’s value will increase
-The inflation rate in the US is higher than in Vietnam, causing the US dollar to depreciate
more than the VND. As a result, the demand for VND will increase, while the central bank
will also reduce the money supply. With the supply curve shifting to the left and the demand
curve shifting to the right, the value of VND increases.
3. The following factors will affect the inflow of direct investment into a country
a) The political issues of that country b ) The political risk
c ) War , Civil War d ) All of the above answers
–All three of these factors negatively affect a country's government, increasing investment
risks, so FDI investors will not invest in countries with wars or political problems.
4. On the foreign exchange market
a) The market participants agree to buy or sell foreign currency in the future at an agreed
price today
b ) The market participants agree ( disagree) to sell foreign currencies in the future at an
agreed price today
c ) The members in the market pay today to receive a certain amount of foreign currency in
the future
d ) The market participants agree to buy and sell a fixed amount of foreign currency at spot
prices which will be announced in the future
-Answer c has the most common characteristics of the foreign market, while the other
answers are related to options. Answer a and d are spot options while answer b is forward
option
5. To perform the balance of international payments balance, which is in deficit, The
government will implement the following measures
a) Lower interest rates to encourage consumers b ) Encourage to invest abroad
c ) Implement policies to reduce import duty of goods d ) Perform adjustment to increase the
exchange rate
-Because interventions are not necessary in a floating exchange rate. In a floating system, an
imbalance between supply and demand in the private Forex is relieved by a change in the
exchange rate. Thus there need never be an imbalance in the balance of payments in a
floating system.
6. United States , the European Community Union and some other countries against
China which maintained a policy of " weak CNY " , because :
a) Concerned China’s export power
b ) Concerned trade deficits , and unfair competition in exports to China
c ) Both answers are correct
d ) No answer is appropriate
-Devaluing your currency makes your products cheaper abroad. It also makes foreign
products more expensive inside your country. These increase your exports and lower your
imports. This puts the USA and other countries at a disadvantage by increasing its trade
deficit against China.
7. The direct intervention used to regulate the exchange rate is:
a)Regulating the supply and demand of imported and exported goods through international
trade policies;
b)Measures to manage buying, selling and intervening in foreign currency supply and
demand;
c)Change of interest rate through regulation of money supply - demand;
d)Not the above measures;
This is because direct intervention in the exchange rate involves central banks buying or
selling foreign currencies in the foreign exchange market to influence the exchange rate.
8. The spot rate is defined as:
a)Exchange rate is applied and recorded in economic contracts;
b)Exchange rate is applied in the spot transactions;
c)The exchange rate is applied in the derivative transactions with a period of less than 3
months;
d)The exchange rate is determined by the interbank money market;
This is because the spot rate is the exchange rate that is applied for immediate delivery of the
currency. In other words, if you agree to buy or sell a currency at the spot rate, the transaction
will take place immediately.
9. The adjustment of the central exchange rate between VND (VND) against the
US dollar (USD) of the State Bank of Vietnam since early 2020 due to the impact of Covid
19 epidemic may have impact on:
a) Increase the inflation rate in Vietnam in the last 6 months of 2020;
b) Increase net exports and improve Vietnam's current account deficit by 2020;
c) Reduce the deficit of international payment balance by 2020;
d) All of the above impacts;
e)None of the above impacts;
The depreciation of VND against USD may lead to increased inflation, reduced net exports,
and a larger current account deficit.
10. Assuming that Vietnam continues to peg the exchange rate to the US dollar
(USD), when the trade war between the US and China continues to develop complicatedly,
the exchange rate between VND (VND) and USD (USD) from the second half of 2020 will
have fluctuations:
a) Increasing the price of VND and decreasing the price of USD;
b) Increase the price of USD, decrease the price of VND;
c) Both currencies change, so the exchange rate fluctuates slightly;
d) There is no basis to determine;
This is because a pegged exchange rate system attempts to maintain a fixed exchange rate
between two currencies, typically by buying or selling the pegged currency in the foreign
exchange market to offset any supply or demand imbalances. However, even with a pegged
exchange rate, fluctuations can still occur due to various factors, such as changes in interest
rates, political instability, or economic shocks.
11. To improve the balance of international payments balance which is in deficit, the
government will implement the following measures:
a) Lower interest rate to encourage consumers b) Encourage to invest abroad
c) Implement policies to reduce import duty of goods
d) Perform adjustment to increase the exchange rate.
To improve a balance of payments deficit, the government can reduce import duties,
encourage exports, promote tourism, or depreciate the exchange rate.
12. Factor income
a. consists largely of interest, dividends, and other income on foreign investments
→ Factor income: the 3rd category of the current account, consists largely of payment
and receipts of interest, dividends, and other income on foreign investment that were
previously made. (p.65)
b. and is a theoretical construct of the factors of production, land, labor, capital, and
entrepreneurial ability.
c. is generally a very minor part of national income accounting, smaller than the
statistical discrepancy.
d. none of the above
13.To perform the balance of international payments balance which is in deficit. The
government will implement the following measures:
A. Lower interest rates to encourage consumers
→ On the one hand, lower interest rates encourage consumer spending; therefore there
will be a rise in spending on imports. On the other hand, lower interest rates should cause a
depreciation in the exchange rate. This makes exports more competitive, and if demand is
relatively elastic, the impact of a lower exchange rate should cause an improvement in the
current account.
B. Encourage to invest abroad
→ Incorrect. The impact of investing abroad on the overall balance of payments depends on
the net effect of the current account and capital and financial account. If the increase in
exports and income from foreign investments outweighs the outflow of capital for investing
abroad, it can contribute to a surplus in the balance of payments. Conversely, if the outflow of
capital exceeds the gains from exports and income, it can result in a deficit.
C. Implement policies to reduce import duty on goods
→ Incorrect. Reducing import duty would lead to an increase in imports and hence would
lead to a higher current account deficit)
D. Perform adjustments to increase the exchange rate
→ Incorrect. Exchange appreciation means increase in the rate of exchange of domestic
currency in terms of foreign currency. When exchange appreciation happens, the country's
exports tend to fall and imports rise.
- Impact on exports: a higher exchange rate increases the prices of goods and services in
terms of foreign currencies, potentially making them less attractive to foreign buyers. As a
result, the quantity of exports may decrease, and the country's export competitiveness may be
reduced.
- Impact on imports: Domestic consumers may find it more attractive to purchase imported
goods due to their lower prices compared to domestically produced alternatives. This can lead
to an increase in imported goods as they become more affordable.
14. When a country's currency depreciates against the currencies of major trading
partners,
A. the country's exports tend to fall and imports rise
B. the country's exports tend to rise and imports fall
C. the country's exports tend to rise and imports rise
D. the country's exports tend to fall and imports fall
→ America and India are trading partners. The initial exchange rate was, say 50 Rupees (₹)
for 1 Dollar ($). Later the Indian Rupees got depreciated to ₹100 per $1.
(a) In case of exports:
When the Indian currency gets depreciated to ₹ 100 for $1, America will be able to purchase
goods from India at a lower price than before, that is, for a product worth ₹200, America
used to pay $4 ($4 * ₹50 per $ = ₹200). However when Indian Rupees gets depreciated,
America will be ₹200). Therefore America will buy more goods from India than earlier and
India’s exports tend to rise.
(b) In case imports:
A product in America worth $5, India used to pay ₹250 ($5 * ₹50 per $ = ₹250). However
when the Indian Rupees gets depreciated, India has to pay ₹500 ($5 * ₹100 per
$= ₹500) for the same product. Therefore India will have a tendency to purchase lower
quantities of that product, which is purchased at a lower price earlier for a higher price. Thus
the import falls.
*Note: The exchange rates used in this example is not actual.
15. In the long run, both exports and imports tend to be
A unresponsive to changes in exchange rates.
B. responsive to changes in exchange rates.
C. both a and b
D. none of the above
→ When a country's exchange rate increases relative to another country's, the price of its
goods and services increases. Imports become cheaper. Ultimately, this can decrease that
country's exports and increase imports.
A weaker domestic currency stimulates exports and makes imports more expensive;
conversely, a strong domestic currency hampers exports and makes imports cheaper.
16. The capital account measures
A. the sum of U.S. sales of assets to foreigners and U.S. purchases of foreign assets.
B. the difference between U.S. sales of assets to foreigners and U.S. purchases of foreign
assets.
C. the difference between U.S. sales of manufactured goods to foreigners and U.S. purchases
of foreign products.
D. none of the above.
→ The capital account balance measures the difference between U.S. sales of assets to
foreigners and U.S. purchases of foreign assets. U.S. sales (or exports) of asset are recorded
as credits, as they result in capital inflow. On the other hand, U.S. purchases (imports) of
foreign assets are recorded as debits, as they lead to capital outflow. (p.66)
17.A depreciation will begin to improve the trade balance immediately if
A. imports and exports are responsive to exchange rate changes.
B. imports and exports are inelastic to the exchange rate changes.
C. consumers exhibit brand loyalty and price inelasticity.D. b and c.
→ A depreciation will begin to improve the trade balance immediately if imports and exports
are responsive to the exchange rate changes. This concept is rooted in economics and pertains
to the elasticity of import and export demand. When a country's currency depreciates, its
exports become cheaper and imports become more expensive. If importers and exporters are
responsive (elastic) to these exchange rate changes, they will adjust their transactions
accordingly. This implies that consumers will switch to cheaper domestic goods or goods
from the depreciating country, thereby reducing imports and increasing exports.
Consequently, this could improve the trade balance immediately.
18.International banks are different from domestic banks in what way (s)? A.
International banks can arrange trade financing
B. International banks can arrange for foreign exchange transaction
C. International banks can assist their clients in hedging exchange rate risk
D. All of the above
International banks typically offer a broader range of services compared to domestic banks,
including trade financing, foreign exchange transactions, and assisting clients in hedging
exchange rate risk
19. Suppose the rate of inflation in the UK is higher than in Vietnam, this will affect
the supply, demand, and exchange rate of the VND:
A. Supply of VND will fall, the demand for VND will increase, and VND's value will
increase
B. Supply of VND will rise, the demand for VND will decrease, and ND's value will
decrease.
C. Supply of VND will fall, the demand for VND will increase, and VND's value will
decrease
D. Supply of VND will rise, the demand for VND will decrease, and VND's value will
increase.
20. On the foreign market
A. The market participants agree to buy or sell foreign currency in the future at an agreed
price today.
B. The market participants agree (disagree) to sell foreign currency in the future at an agreed
price today.
C. The members in the market pay today to receive a certain amount of foreign currency in
the future.
D. The market participants agree to buy and sell a fixed amount of foreign currency at spot
prices which will be announced in the future.
This is the definition of a forwards contract in the foreign exchange market. Forwards
contracts are agreements between two parties to buy or sell a certain amount of foreign
currency at a predetermined price on a future date. The price of the foreign currency is agreed
upon today, and the exchange of currency takes place on the future date.
21. During the period of the classical gold standard (1875-1914) there were

A. highly volatile exchange rates.

B. volatile exchange rates.
C. Moderately volatile exchange rates.
D. stable exchange rates.
E. no exchange rates.
During the classical gold standard period, exchange rates between countries were stable
because the value of each currency was fixed to a certain amount of gold.
22. The first full-fledged gold standard
A. was not established until 1821 in Great Britain, when notes from the Bank of England
were made fully redeemable for gold.
B. was not established until 1780 in the United States, when notes from the Continental
Army were made fully redeemable for gold
C. was established in 986 during the Han dynasty in China.
D. none of the above
The first full-fledged gold standard was not established until 1821 in Great Britain when
notes from the Bank of England were made fully redeemable for gold.
23. Factor income
A. consists largely of interest, dividends, and other income on foreign investments
B. and is a theoretical construct of the factors of production, land, labor, capital, and
entrepreneurial ability.
C. is generally a very minor part of national income accounting, smaller than the
statistical discrepancy.
D. none of the above
Factor income often includes returns such as interest and dividends earned on foreign
investments.