Economics is the study of the production and the consumption of goods and the transfer of wealth to produce and obtain those goods.. Free market economy is an economic system in which:
Trang 1CHAPTER 1
UNIT 1: ECONOMICS
It talks about ECONOMICS There are 3 main ideas:
Idea 1: Important concepts.
- Resources includes the time and talent people have available, the land, buildings, equipment, and other
tools on hand, and the knowledge of how to combine them to creat useful products and services
- People’s choice (Important choices) involves:
How much time to devote to work, to school and to leisure
How many dollars to spend or save
How to combine resources to produce goods and services
How to vote and shape the level of taxes and the role of government
- Well-being includes the satisfaction people gain from their products and services that they consume, from
their time spent in leisure and in job, and the security and services provided by effective government
- Economics
Economics is the study of how people choose to use the resources Because resources are limited
Economics is the study of the production and the consumption of goods and the transfer of wealth
to produce and obtain those goods
Important of economics: Economics shape the world Because buying and selling are activities vital
to survival and success, studing economics can help one understand human thought and behavior
Benefit from studying economics : When we have knowdlege of economics, we can predict
economic development in the future We can give advice when the economy enters recession or overheating Economics helps a high income job
Idea 2: 2 main types: macroeconomic & microeconomic
- Microeconomics focuses on the actions of individuals and industries, like the dynamics between buyers and sellers, borrowers and lenders
- Macroeconomics studies the economic activity of an entire country or the international marketplace
Idea 3: Famous economist & theorities.
- Adam Smith:
Invisible hand
Free market & profit motive
Private ownership of the means of production
=> Free market economy
He believed that people who acted in their own self – interest produced goods and wealth that benifited all of society
Market can regulated itself to maximize efficiency, gov shouldn’t interfere
- Karl Marx: He believed that such an exploitation leads to social unrest and class conflict
Criticísm of capitalism
Support public ownership of the means of production
Trang 2- Keynessian School: The role of Gov in the economy He described how government can act within capitalistic economics to promote economics stability
Direct gov control planning of all economic activities
Visible hand => gov control of economic activities at macro level (through macro economic policies: reduced taxes and increased gov spending when the economy becomes stagnant, and vice versa when the economy is overheating.)
=> mixed economy
Some question:
1 What are the aspect of country’s economy?
How country uses its resources
How much time laborers devote to work and leisure
The outcome of investing in industries
Why business succeed or fail
2 Why did you choose to study economics?
Because the knowdlege of economics is very necessary When we have knowdlege, we can predict economic development in the future We can give advice when the economy enters recession or overheating Economics helps a high income job
3 What is economist?
They are people who study economics
4 What is capitalism?
The economic system in which the means of production is privately held
5 What purpose do people use their resources for?
People use resources to maximize their benefits and improve their well – being
6 What are means of production?
Means of production is used to produce goods & services
UNIT 2: ECONOMIC SYSTEMS
1 What is a free market economy?
Free market economy is an economic system in which:
- The market is regulated by law of demand and supply
- There are a lot of free competition among companies compete freely
- Gov affects through policies: fiscal & budgetary policy
2 What is a planned economy?
Planned economy is an economic system in which:
- No free competition
- Gov directly affects the economy
3 What is a mixed economy?
Mixed economy is an economic system in which: goods and services are produced by the gov and some
by private enterprise
4 What are the differences between a market economy and a planned economy?
- A market economy has competition
Trang 3A planned economy hasn’t competition
- A market economy has affect through law of demand and supply, through fiscal & budgetary policies
of government
A planned economy has directly affect by gov
UNIT 3: MICROECONOMICS
It talks about MICROECONOMICS There are 3 main ideas:
Idea 1: The limit (limit budget, limit resources, financial resources, human resources)
- For a person: Limit includes: time, money, health, grey matter,…
- For a nation: Limit includes: land, capital, labor, technology,…
=> So we must/should save resources, use effectively, avoid waste by: set feasible objective and target, choose the most demand for a particular period
Idea 2: The allocation of scare resources
It is done by gov
- Firms are told what & how much to produce,
how to produce it
- Workers have little flexibility in choice of jobs,
hours worked, even where they live
- Consumers have very limited set of goods to
choose
=> Many tools of microeconomics are limited
relevance in these countries
It is done by interact between consumers, workers and firms
=> Have much more flexibility and choice
Idea 3: 3 important themes of microeconomics
Making optimal trade off
Trade off is consideration of choices/exchanges to maximize benefits.
Consumer:
Consumer theory: Consumer theory describes how consumer based on their preferences, maximize their well – being by trade off the purchase of more of some goods with the purchase of less of others
Trade off of consumer: They face the limited income They trade off between spending and saving, current consumption and future consumption, buying more or less
Worker: Trade off of worker: They face the limited time They trade off between working and leisuring, working and continuing higher educationg, working for small and large education
Firm:
Theory: Theory of the firms describes how these trade off can be best made
Trade off: They face the limited financial resources, human resources They trade off producing this sets of product with other, buying machine and hire more workers
Trang 4 The roles of prices: decide choices/trade offs
The central roles of market.:
Links supply and demand, buyer and seller
Determine prices: in planned economy: determined by gov // in market economy: determined by the interaction of consumers, workers, firms
Allocate resources
UNIT 4: MACROECONOMICS
It talks about MACROECONOMICS There are 4 main ideas:
Idea 1: The goal of macroeconomics
The goal of macroeconomics is to look at overall economics trend such as: employment levels, economic growth, inflation,
Idea 2: Macroeconomics policies
- Controls a gov’s revenue and spending
- Supervised by Ministry of Finance
- Tools: taxation and gov spending
- Controls a nation’s money supply
- Supervised by Central Bank
- Tools: reserve requirement, discount rate, open market operation
=> Macroeconomics objectives:
- High economics growth
- Keep inflation under control
- High employment
- Balance of payment
Idea 3: Different between macro and micro-economics
- It is the study of country and gov decisions
- Focuses on the activities of entire country or
internation economy, economy-wide phenomenal
(GDP, inflation,…)
- Look at overall economic trends: employment
levels, economic growth, inflation,
- Uses: fiscal policy and moneytary policy
- Top-down approach
- It is the study of individual and businesses decisions
- Focuses on the economic behaviors of individual: household, consumer, enterprise,…
- Make regarding the allocation of resources and prices
of goods and services
- Uses: price policy and competitive policy
- Bottom-up approach
Idea 4: Relationship between macro and micro.
They are interdependent and complement one another Example: increased inflation (macro) => price of goods will increase (micro)
Trang 5=> provide fundamental tool to study economy.
UNIT 5: DEMAND AND SUPPLY
It talks about DEMAND AND SUPPLY There are 4 main ideas:
Idea 1: Difference between demand/supply and quantity demanded/quantity supplied?
Supply/demand is the quantity of goods and services, the sellers/buyers are willing to sell/buy at every price levels
The quantity supplied/quantity demanded is the quantity of goods and services the sellers/buyers are willing to sell/buy at specific price in period of time
Idea 2: Relation between prices and quantity demanded/quantity supplied?
If the prices of goods increase, the quantity demanded will decrease
If the price of good increase, the quantity supplied will increase
Idea 3: The shift factors of demand and supply? Example.
- The shift factors of demand are: society’s income, prices of substitute goods, expectation of buyer tastes Example: If the income increases, the demand will increase Demand curve will shift to the right And vice versa
- The shift factors of supply are: the prices of input, technology, gov policy (taxes,…), supplies expectation Example: If the prices of input increases, the supply will decrease The supply curve will shift to the left
Idea 4: Demand/Supply curves? Equilibrium? Excess demand/supply?
- Demand/Supply curve is the graph which show relation between prices and quantity demanded/supplied
- Equilibrium:
+ What? It is the point where demand curve cuts supplied curve
+ Intersection of demand curve and supply curve?
When demand curve and supply curve intersect, we have equilibrium Equilibrium occurs when quantity demanded is equal to quantity supplied So price unchanged
- Excess:
Demand:
Trang 6+ When? If quantity demanded is bigger than quantity supplied, this is a shortage So price of good will increase
+ advantages: the companies make more profits, promote productions
+ disadvantages: it restrict consumption, it may result inflation
Supply:
+ When? If quantity supplied is bigger than quantity demanded, this is surplus So price of good will decrease
+ advantages: they have to pay less money for goods, so encourages the consumptions
+ disadvantages: profits of companies will decrease, shouldn’t promote production
CHAPTER 2 UNIT 6: PUBLIC FINANCE
It talks about GOV BUDGET REVENUE There are 2 main ideas:
Individual income taxes
Corporate income taxes
Custom duties
Excise tax
=> Federal Fund
=> Gov spending
Payroll taxes
=> The Trust funds
=> specific programs
=> social security, medi care
By issue bonds so must pay interest and principle at maturity
=> 2 debt + Debt held by Federal Account => borrowed from Trust funds + Debt held by the Public => borrowed from:
International & domestic investor
State & local government
Federal Reserve => to control money supply
- Gov spending:
Provide public services: transport, education, healthcare, security, electric supply,…
Repay debts (interest + principle)
Invest in firms & projects
Grant aids, supports, pensions, welfare
Finance development programines
Pay administration costs: salary, building,…
Organize national/international events
Fund diplomatic activities
Adjust supply & demand, stabilize prices
II Some question
1 What is the difference between federal fund and trust fund?
Federal fund is designated from income tax and corporate tax It uses for conducting the annual appropriation process
Trust fund is designated from payroll tax It uses to pay for very specific government programs
2 What is federal budget used for?
A part of revenue is used for specific government program or government activities in general
3 What is the debt helb by public and debt held by the federal account?
Debt held by the federal account is the amount of money that the treasury has borrowed from its self (trust fund)
Debt held by the public is the total amount the government owes to all its creditors (in the table)
To earn interest
Trang 74 Who does the government owe money to?
There are domestic investors and foreign investors
o The domestic investors include: the general public, the general account
o The foreign investors include: foreign individual, the governments of foreign countries
5 What is public finance use for?
It is uses to:
+ to ensure the government existence and operation
+ to fufill macro objectives and encourage micro growth
+ to redistribute incomes and ensure social equality
6 What is the public finance?
It is study of how the government sector pay for expenditures through taxed and borrowing
UNIT 7: FISCAL POLICY
It talks about FISCAL POLICY There are 4 main ideas:
Idea 1: Concepts? & Effects?
- Concepts: Fiscal policy is a government policy related gov spending and taxation.
- Effects:
The economy tends to grow.
If the gov spends more money to build a new highway, it will have create jobs Jobs create income that people spend on purchases => total demand will increase.
The economy tends to shrink.
If the gov increases taxes, it will decrease total demand Households and businesses have less of their income
to spend, they purchase fewer goods.
Idea 2: Deficit spends? Helpful or harmful?
- What is deficit spending?
Deficit spending is spending funds obtained by borrowing or printing instead of taxation.
- When?
Deficit runs when the gov spends more than it receives And to finance the deficit, the gov borrows or prints money.
- Helpful or harmful?
Helpful
When unemployment is high, deficit will create jobs, jobs create income The economy will expand because more money is being pumped into it.
Harmful
When unemployment is low, a deficit may result in rising prices or inflation The additional gov spending creates more competition for scarce workers and resources and this inflates wages and prices.
Idea 3: 2 types of fiscal policy: contractionary/expansionary: What? When? What for?
Expansionary/Loose Contractionary/Tight What? Expansionary means gov spending increases or
taxation decreases or both.
Contractionary means gov spending decreases or taxation increases or both.
When? When unemployment is too high, economy is not
growing fast enough.
“By increasing spending or cutting taxes, the gov leaves individuals and businesses with more money
to purchase goods or invest in new equipment
When they increase their purchases, raise demand, which requires additional production, creating jobs, generating more spending The result is higher
When inflation is too high, economy is overheating.
“ This policy reduces the amount of money in the economy available for purchasing goods, so decreasing spending, demand, and ultimately , pressure on prices.”
Trang 8employment and a growing economy.”
What for? Use to reduce unemployment, promote economic
growth.
Use to slowdown overheating economy, keep inflation under control.
Idea 4: Factors to consider in fiscal policy decision making: Inside & Outside factors.
- Inside factors:
Growth, inflation, employment, revenue (tax revenue, borrowing, printing), public reactions, role of Gov.
+ If the gov borrows money, it will decrease the supply of money available in the economy for lending, and the cost
of borrowing money, the interest rate, may rise.
If the gov prints money, it will increase the supply of money in the economy, without a corresponding increase in
available goods; prices – and inflation – are likely to rise.
+ grow, employment rate: same the table
- Outside factors:
requirements by international organizations: IMF(often grants aid packages subject to conditions relating to fiscal policy), WTO, ASEAN, APEC,…; other government’s policy such as: Switzerland has generous tax programs so it can tempt companies to relocate.
UNIT 8: TAXATION
It talks about TAXATION There are 4 idea:
Idea 1: Functions of taxation
- Raise funds for gov expenditures: serve as the main source of the gov budget revenue.
- Redistribute wealth in the society =>ensure social equality, reduce the gap between the rich & the poor
Levied on income tax
Who has income, that person must pay tax
Who have high income, that person must pay higher taxes
Who have no income, he or she does not have to pay tax
- Control supply & demand, production & consumption in the market.
- Stabilize prices, national finance, control inflation.
When economy slowdown, investments stagnate, production & consumption are reduced: Gov reducing taxes on production, reduce tax on goods produced to encourage the creation of profits, stimulate investment
in manufacturing Or increase income taxes on savings and income from reserve assets, which will encourage the introduction of capital into investment, production and business.
When the economy is flourishing, to prevent the risk of an economy "hot"
development leading to excessive inflation and crisis , Gov increases tax rate to reduce investment and reduce the consumption.
- Regulated aggregate demand: encourage (by cutting taxes) or discourage (by increasing tax) investments in certain industries.
- Adjust allocation of scarce resources, act as the tool to control the economy at macro-level.
- Affect foreign trade (raise export & limit import), protect national production, ensure the balance of payments
Custom duties
=> Taxes serve as an important tool for macroeconomic regulation.
Idea 2: Disadvantages of taxation
- Double taxation:
It means business profits are generally taxed twice: companies pay tax on their profits, and the share holders pay income tax on dividends
- High marginal tax rate
Means the tax people pay on any additional income is always high, which is generally a disincentive to both working and investing.
- Regressive sales tax
Why? Because poorer people need to spend a larger proportion of their income on consumption than the rich.
Trang 9Idea 3: Tax evasion (illegal way to avoid taxes)
Idea 4: Tax avoidance (legal way to reduce taxable income)
- Firms reduce taxable income by:
Paying more benefits for the staff : company
cars, free health insurance, subsidized lunches.
Doing charity: to reach tax-deductable.
- Avoid tax on profits
Using accelerated depreciation accounting.
Raising investments & expenses: on new
factories, machines, ….
=> Make use of tax loopholes.
Set up head-offices in tax heaven.
(?) What is tax haven/heaven?
=> Tax heaven is the country where tax are low.
- Making wrong income declaration:
The self-employed people – whose income is more difficult to control than that of company employee Because they also undeclared part-time evening jobs.
- Making wrong accounting records.
- Smuggling & trade fraud.
- Laundering money
(?) What is laundering money?
=> The criminal organizations tend to pass money through a series of companies in very complicated transactions in order to disguise its origin from tax inspectors and the police
Some Questions:
1 How many kinds of taxes?
There are 2 kinds of taxes: direct tax and indirect tax.
- Direct tax is a tax levied on taxable person such as income tax.
- Indirect tax is a tax levied on goods and services such as payroll tax, excise tax and custom duties,…
2 How many kinds of tax rates?
There are 2 kinds: progressive income tax and regressive income tax.
- Progressive is a tax charging at higher rates on higher incomes.
- Regressive is a tax charging at lower rates on higher sales.
3 What is tax?
Tax is amount of money that you must pay for government according to your income, your property, goods and services that you bought before.
Terms:
- Income tax is a tax levied on income of corporation or individual.
- Excise duty is a tax levied on specific goods and services: luxury, smoking.
- Payroll tax is a tax imposed on employers or employees and are usually calculated as a percentage of the
salaries that employers pay their staff.
- Corporate income tax is a tax based on the income made by the corporation.
- Custom duty is a tax imposed on imported goods.
Trang 10- Tax shelters: in the way, people use them to avoid tax.
Notes:
(to) tax sth = to impose
levy
fix a tax on sth
set
charge
tax (n) # taxation (n) (#duty/tariff)
sự đánh thuế thuế đánh thuế đánh
vào các gd vào các gd
trong nước ngoại thương
taxable >< non-taxable
taxman >< taxpayer
UNIT 9: DIFFERENT TYPES OF TAXES
- Tax on businesses are usually calculated as a percentage of the profits of the businesses, or what’s left after the company pays its suppliers, workers,… and also after it depreciates its assets (The tax is a percentage of what’s left over, not a percentage of what the company brings in in revenue.)
- Consumption taxes are levied when an individual or household buys stuff.
+ Sales tax: levied as a percentage of the price of most items that are sold to consumers +VAT (value added tax) : Indirect tax on domestic consumption of goods & services, except those that are zero-rated (such as food & essential drugs) or are otherwise exempt (such as exports).
+ It can also take the form of excise or luxury taxes, which are taxes on specific items (cars, alcohol,…) at rates that may differ from the overall sales tax rate.
- Wealth tax: a tax on personal property; capital levy.
- Direct tax: a tax, such as an income or property tax, levied directly on the taxpayer.
- Indirect tax: a tax levied on a commodity that is paid by the consumer as part of the market price.