Ôn tâp TACN1 HVTC
Unit 1: ECONOMICS Q1 What does economic study? Economics studies about the way people choose to use resources to improve well-being Resources are anything pp use to produce goods and service Resources includes the time and talent pp have available, the lands, buildings, equipments and other tools on hand and so on Well-being means satisfactions or happiness pp gain from the products and services they choose to consume Q2 Why pp have to choose to use resources? PP have to choose to use resource because of the limited resource but unlimited pp need Q3 What are branches/ types of economics? What they study? types of economics are microeconomics and macroeconomics - Microeconomics focuses on economic actions of individuals, households, industries - Macroeconomics studies the actions of larger entities such as a country, a region, world or the international market place Q4 What is economic theory of Adam Smith about? First theory is Classical School of Adam Smith He believed that people who acted in their own self- interest produced goods and wealth that benefited all of society Gov should not restrict or interfere in markets because they could regulate themselves and there by, produce wealth at maximum efficient - Capitalism is the mode of production that includes private ownership of means of production Q5 What is Karl Marx economic theory? What is it about? Second theory is Marxism theory and Karl Mar, he believed that such exploitation of factory owners and CEOs leads to social unrest and class conflict Laborers should own and control the means of production Karl Marx pointed out the weakness in capitalism CEOs or employers exploit employees, which leads to class conflict and social unrest Laborers should own and control of production 1|Page Unit 2: ECONOMICS SYSTEM Q1 What is a free market economy? A planned economy? What are differences between market eco and planned eco? Free market eco: Market eco is a system in which the market that is the relation between producers and consumers, buyers and sellers, investors and workers, management and labour is regulated by the law of supply and demand Companies compete freely and government influences the economy through its fiscal and budgetary policies Planned economy: is an economic system whereby the structure of the market is deliberately planned by the state In the planned economy, production and consumption quotas are fixed beforehand and there is no real competition between industrial or commercial organizations DIFFERENCES BETWEEN PLANNED ECO AND MARKET ECO: MARKET ECO - Economic activities are fully PLANNED ECO - Economic activities are decided depend on the role of market by some central authority or by force the Gov - Producer are free to produce the - Producer are not free to produce highly demanded goods in order the highly demanded goods in to maximise their profits order to maximise their profits - Self- interest is the prime consideration - Social welfare is the prime consideration Unit 3: MICROECONOMICS Q1 What is microeconomics concerned with? Microeconomics is concerned with the decision made by small economic units – consumers, workers, investors, owners of resources, and business firms It’s also concerned with the interaction of consumers and firms to form markets and industries 2|Page ? In planned economy, who makes decisions on allocation of resources? Government ? In market economy, who makes decisions on allocation of resources? Consumers, firms, employers, employees (workers) Q2 What does theory of the firm indicate? Theory of consumer indicate? - The theory of the consumer describes how consumers decide to spend their money income and limited budget to maximize their well-being based on their individual preferences - Theory of firms describes how firms decide to allocate resources such as technology, capital production capacity to maximize their profit Q3 Discuss the allocation of scarce resources in microeconomics Microeconomics studies about the actions of individuals and industries It describes how to make the most of the limits such as limited income, limited technology, limited time, etc,… Due to these limited resources, consumers, workers and firms have to make trade-offs For example, consumers trade off current consumption with future consumption Worker have to trade off working now with continuing education, working for large corporation with small corporation, labor with leisure Firms have to choose the type of goods to produce, hire more workers to build a new factory Q4 Role of prices? Trade offs are partly based on the price => price is very important Q5 What is a market? Market is the place where consumers, workers and firms interact In free market economy, the price of a good is decided in the market by the interactions of consumers, workers, firms In a centrally economy, prices are set by the gov Q6 What are the main themes of microeconomics? The first important theme of microeconomics is making optimal trade-offs Consumers, workers and firms make the best choices for their limits such as 3|Page income, time and budget The second important theme is the role of price, which the trade-offs described in the first one are partly based on The central role of markets - the third theme of microeconomics, describes how to determine the prices in the different markets Unit 4: MACROECONOMICS Q1 What is the goal of macroeconomics: The goal of macroeconomics is to look at overall economic trend such an employment levels economic growth, balance of payments, inflation, so on Macroeconomic factors include inflation, economy growth, unemployment, international business, so on Q2 What are microeconomics policies? What are some differences between them? major macroeconomics policies are moneytary policy and fiscal policy The objectives are to promote economic growth and keep inflation under control There are some differences between them Firstly, Ministry of Finance makes decisions fiscal policy while monetary policy is supervised by Central Bank Secondly, fiscal policy controls gov’s revenue such as gov’s spending and taxation but Central Bank’s job is to control a nation’s money supply Thirdly, tools of fiscal policy are tax and gov’s spending, moneytary policy uses some tools like reserve requirement, discount rate, OMO Q3 What are some differences between micro and macroeconomics? - Microeconomics focuses on the action of individuals and industries while macroeconomics studies activities of an entire country or the international marketplace - The goal of macroeconomics is to make regarding the allocation of resources and prices of goods, focuses on demand and supply while the goal of macroeconomics is to look at overall economic trends such as employment levels, economic growth, balance of payments,… 4|Page - The major policies of microeconomics are price policy, competition policy… while the major policies of macroeconomics are monetary policy and fiscal policy - Microeconomics takes a bottom-ups approach to analysing the economy while macroeconomics takes a top-down approach Mac - It is the study of country and gov decisions Mic - It is the study of individual and - Focuses on the activities of entire country or businesses decisions international economy, economy-wide - Focuses on the economic behaviour phenomenal of individual: household, consumer, - Look at overall economic trends: enterprise,… employment levels, economic growth, - Make regarding the allocation of inflation, resources and prices of goods and - Uses: fiscal policy and moneytary policy services - Top-down approach - Uses: price policy and competitive policy - Bottom-up approach Unit 5: DEMAND AND SUPPLY Q1 How does the price of good influence its Quantity demanded and quantity supplied? A change in the price cause a change in Qd and Qs when other factors are constant - If price of a good increases, the quantity supplied will increase and vice versa, the quantity demand will decrease - If price of a good decreases, the quantity supplied will decrease and vice versa A change in the price causes a movement along the demand/ supply curve Q2 Named some shift factors of demand? Shift factors of demand 5|Page Nhân tố phụ cầu Society’s income Thu nhập xã hội Prices of other goods Giá mặt hàng khác Expectation Mong muốn Tastes Thị hiếu Q3: Example about a change in a shift factor that can lead to a change in D/S - When other factors are constant, if society’s income increases, demand for luxury goods and normal goods will increase, demand for inferior goods will decrease - Demand curve for luxury and normal gooods shift to the right, demand curve for inferior goods shifts to the left Ex: When other factors are constant, if price of Honda motorbikes increases, demand for Yamaha motorbikes will increase Demand curve shifts to the right - When other factor are constant, if the price of petrol increase, demand for petrol motorbikes will decrease Demand curve shifts to the left Ex: Input: raw materials, labor, machine,… - When other factor are constant, if there is an improvement in technology, supply will increase and supply curve shifts to the right Q4 Describe demand curve? - Prices and shift factors of demand( society’s income, prices of other goods, expectations, tastes) can influence buyer behavior - On the model/graph, a price change causes a movement along a given demand curve A change in one of shift factors causes a shift of entire demand curve to the left or to the right Describe supply curve? - Prices and shift factors ( including taxes, technology, prices of inputs or supplier’s expectations) can influence seller behavior - On the model, a price change causes a movement aong a given supply curve 6|Page A change in one of shift factors causes a shift of entire supply curve to the left or to the right Unit 6: PUBLIC FINANCE Q1 What are some sources of gov revenue? Gov revenue comes from many kinds of taxes, profit from investment, fees and fines, and borrowing by issuing and selling gov securities (mostly bonds) Some different types of tax are: Income taxes: is the tax imposed on personal income Corporate income tax: is the tax imposed on profit of company Payroll tax: the tax imposed on salaries or wages of employee Gain tax: imposed on frofit made by selling assets Excise tax: imposed on special goods and services like beer, alhocol,… Custom duty: imposed on imports *What are the main sources of government revenue? - There are main source of government revenue First, tax revenue comes from three major sources: individual income taxes, payroll taxes and employers, corporate income taxes Income taxes and corporate income taxes become “federal funds” and payroll taxes become “trust fund” The second one is “borrowing” The US treasury borrows money by issuing bonds and other types of securities to finance the debt Q2 What are funds formed from goverment tax? What are they used to? Trust fund Payroll tax Federal fund - Income tax tax? For what Very specific - Corporate tax - Spend them and just about activities? programs such as anything when the President and social security and Congress conduct the annual What type of Medicase Q3: What are types of gov/ federal debt? 7|Page appropriation process The federal debt is the sum of the debt held by the public plus the debt held by federal accounts + The debt held by the public is total amount of money gov borrows from individuals or organizations in that country (domestic investors) or in other countries (foreign/international investors) + Debt held by federal accounts is total amount of money that the Treasury has borrowed from itself when trust fund run a surplus Unit 7: FISCAL POLICY Q1 What is the deficit spending? How is it helpful and harmful for the economy? - Deficit spending is spending funds obtained by borrowing and printing instead of taxation - It can be useful or harmful for the economy + Useful when unemployment rate is too high, gov borrows money to undertake projects, which use workers who would be idle, it will create more jobs and the economy will expand because more money is being pumped into it When pp have more income, they will spend more and production increase, more jobs are created + Harmful when the unemployment rate is low Gov pumps money into the market, which can increase supply, it may result in rising prices or inflation, and creates more competition for scarce workers and resources Q2 Factors affecting decision on fiscal policy? Factors affecting decision on fiscal policy include inside factors and outside factors Inside factors include level economic growth, level of unemployment or inflation, ways to finance deficits, political consideration Outside factors include fiscal policies of other countries and requirements of ITM or World Bank Q3 What is an expansionary/ contractionary fiscal policy? How Expansionary/Loose By reducing taxation and increasing 8|Page Contractionary/Tight By increasing taxation and When Why public spending It occurs when a Gow feels its economy reducing public spending It occurs when economy is is not growing fast enough or overheating and inflation is too unemployment is too high high With the aim of stimulating total spending To restrict demand and slow in the economy, known as aggregate down the economy demand Unit 12: MONETARY POLICY Q1 What are tools of MP? Which is the most regular? There are three main tools of monetary policy - The first tool is reserve requirement It is the percentage the Fed sets as the minimun amount of reserves that banks must have for safety (by changing the RR, the Fed can increase or decrease the money supply: If the Fed increase the RR, it contracts the money supply, banks have to keep more reserve so they have less money to lend out) - The second one is discount rate - the rate of interest the Fed charges for bank loans (by changing the DR, the Fed can expand or contract the money supply: If the Fed decrease the DR, it expands the money supply, banks have to keep less discount so they have more money to lend out.) These two tools above are mainly used for major change - The primary tool of monetary policy is open market operations-the Fed’s buying and selling Gov securities (to expand the money supply, the Fed buys bonds To contract the money supply, the Fed sells bonds) By changing main tools, central bank can expand or contract money supply Q2 What is an expansionary/restrictive MP? - Central bank uses expansionary MP when the economy is growing slowly In this case, central bank decreases reserve requirement, reduces the discount rate or buys more bonds This can increase money supply, increase aggregate demand 9|Page - Central bank uses restrictive MP when the economy is overheating In this case, central bank increases reserve requirement, increases discount rate or sells more bonds This will reduce lending capacity and increase interest rate, thereby reducing money supply in the market When Expansionary policy When the economy is slows down, the gov Restrictive policy When the economy is overheating wants to increase aggregate demand How Encourage pp to borrow and spend more - Reduce bank lending capacity money, increase the money supply - Reduce pool Effect It causes the demand curve shift to the - Lessened loan It causes the demand curve shift to ? the left right Unit 8: TAXATION Q1: What are some functions of taxation? - Definition: Tax is compulsory fee gov collects from individuals and organizations to finance gov’s programs/ activities/ expenditure - Taxation is the gov’s action of collecting tax to finance its programs * Functions: - Tax is a source of gov revenue It is used to finance gov programs - Tax is tool of fiscal policy So it is used to regulate the economy - Each type of tax has its own functions For example, excise tax is used to restrict/ limit consumption of some goods which is not good for health or environment Custom duty is used to protect domestic industries And gov can also encourage capital investment by permitting various method of accelerated depreciation accounting that allow companies to deduct more of the cost of investments from their profits, and consequently reduce their tax bills - Main function of taxation is to raise revenue Government expenditure Gov uses taxes to encourage capital investment by permitting various methods of accelerated depreiciation accounting (deductiong costs of investment from 10 | P a g e profits to reduce tax bills) The last one is through progressive tax system, Gov can redistribute wealth to ensure social equality - Other purpose functions are to dissuade people from smoking, drinking alcohol and encourage capital investment Q2 What is tax evasion? Example/ How pp evade tax? - Tax evasion is using illegal ways to avoid paying tax - Example: + People not declare imports at the customs, part – time jobs => underground economy + Businesses make false declarations about cost to reduce tax + Laundering money to reduce taxable money criminal organizations pass money into different companies in a very complicated transaction to disguise the origin of money Q3 What is tax avoidance? Example/ How individual avoid paying tax? How businesses avoid paying tax? - Tax avoidance is using legal ways to reduce/ avoid tax by reducing the tax money to legal minimum - For individuals: + Employers give highly – paid employees perks instead of taxable money + Tax shelter: individuals can postpone payment of tax by putting apart of salary into pension plan life insurance policies + Tax deductible: money on charities are subtracted from taxable money - Avoiding tax on salaries: Firstly, companies often give perks to employees instead of taxable income (known as loopholes in tax law) Secondly, people can postpone the payment of tax by investing in pension funds or life insurance policy, known as tax shelter Finally, tax deductibe means substracting a certain 11 | P a g e amount from taxable income - Avoiding tax on profits: Companies can bring forward capital expenditure to use up all profits knowns as making tax loss or setting up head offices in countries where taxes are low known as tax havens is a way to avoid taxes on profit Unit 10: INSURANCE Q1: What is insurance in financial definition? - Insurance is the financial arrangement that redistribute the cost of unexpected loss - Insurance system collects premium from every participant (insured), but pay compensation for very few insured who suffer from unexpected losses Q2: Why are people willing to pay insurance premium? - People are willing to pay premium because: + They can get compensation if loss actually occurs + If no loss occur, they are relieved of the uncertainty about a loss Q3: Is insurance like gambling? Why? - Sometime, It is said that insurance like gambling, but the difference is gambling contracts will not enforce, while insurance contracts will enforce - Claim: a formal request for payment or services covered by insurance policy Unit 11: MONEY AND ITS FUNCTION Q1 What are functions of money? Explain each function? The first function is money as a medium exchange: A medium of exchange is anything that is widely accepted in payment for goods and services and in settlement of debts Money as a measure of value: Money is used to measure the value of things offered at the market It measures the value of goods in unit of account Unit 12 | P a g e of account is the unit of which prices are quoted and values are kept Unit of account is different from country to country Money as a Store of value: because it can be used to make purchase in the future It means if you have money but you don’t buy goods in certain, you can save it to buy in the future (Save now, spend later) This function can suffer from intention Money as a Standard of deferred payment: Means if you buy something but you don’t pay immediately, you can pay it in the future Money is used to pay after you buy something Money is used to to settle debt in the future (Buy now, pay later.) > The most important function is money as a medium of exchange Because if money without this function, all transaction would be more difficult and waste time If this function wasn’t done, other function would not be done Q2 Differences between commodity and token money Commodity money is a useful good that serves as a medium of exchange As a result, the value of commodity money is about equal to the value of the material contained in it Example: gold, silver, copper, furs, skins,… Token money is a means of payment whose value or purchasing power as money greatly exceeds its cost of production or value in uses other than as money Example: cash, bank note, credit card,… Unit 14: FOREIGN EXCHANGE MARKET (FOREX) Q1 What is forex? Why is it considered to be an Over The Counter market? The foreign exchange market (forex) is the financial market in which such national currencies as dollars, pesos, deutschemarks, yen, francs, and others are exchanged - Characteristics (Feature): 13 | P a g e + It is not an organized market with fixed trading hour and a physical meeting place + It is an over-the-counter market (because all the nations join the forex -> different time zones in different countries) + The primary communication instruments are the telephone and the computer *Why is foreign exchange market to be an OTC market? Because transactions are made throughout the day via telephone and computer link It is not an organized market with fixed hours and physical meeting place Q2 What are types of foreign exchange transaction? - There are types of forex transaction, they are spot transaction and forward transaction - Spot transaction: transaction is undertaken on the actual exchange date (delivery date) which is business days later - Forward transaction: the actual exchange date (delivery date) is specified date in the future, even a year or more Q3 groups of participant in the Forex? - Customers: individuals (travellers, students, investors), multination companies (investment), import – export companies (trade), acquire foreign currency - Dealers: banks: can trade foreign currencies on their own accounts Banks make a profit from the difference between bid rate and offer rate - Brokers: specialist companies with telephone lines to the banks throughout the world Brokers help to find the best dealing rate (offer and bid rate) for banks, brokers get commission for their services Q4: types of participants in FOREX market? - Customers (such as: importing and exporting companies) need foreign currencies for their cross-border trade or investment 14 | P a g e - Market maker (central bank) quote buying (bid) and selling(offer) rates for currencies in the forex market - Dealers such as banks or coporations earn a profit on the difference between buying and selling rates - Brokers act as intermediaries between banks and they don’t deal on their own account They charge a commission for their service Unit 15: FINACIAL MARKET Q1 What is a financial market and its function? Financial market is a market in which financial instruments (valuable paper/ document) such as debt, bonds, shares, currencies are exchanged - Gov issue bonds and sellers investors Function of the financial market is channelling funds from those who have saved surplus funds to those who have a shortage of funds Transfer funds from leader who has a surplus of fund to borrowers who have a shortage Q2: What are some differences between primary and secoundary market? Primary market Secondary market Is a financial market in which new Is a financial market in which securities are sold to initial buyers by the securities that have been previously corporation or G agency borrowing funds issued can be resold It is not well known to the public It is well known to the public Because the selling of securities take place behind closed doors Function of primary market is to raise + make it easier and quicker to sell fund for issue of firms financial instruments to raise cash + help determine the prices of fresh share in primary market Q3: What are some differences between money and capital market? Money market is a financial market in which only short term debt instruments are traded And the money market is safer and more liquid than capital market.( Thị trường tiền tệ thị trường tài 15 | P a g e có cơng cụ nợ ngắn hạn Và thị trường tiền tệ an toàn lỏng lẻo thị trường vốn) Capital market is a financial market in which longer term debt and equity instruments are traded.( Thị trường vốn thị trường tài chính, giao dịch mua bán trái phiếu dài hạn công cụ vốn chủ sở hữu) Q4: What are some differences between debt and equity market? Debt market is a financial market in which debt Equity market is a financial market in which equity instruments like bonds, mortages are instrument, such as common stock is traded traded Debt instrument include: short term, Equity instruments are consider as long long term, and intermediate term term ones Because they don’t have Debt holder receive predetermined fixed maturity date Equity holder benefit directly from any interest rate increases in the corporation’s profitability or asset value Equity holders get dividends share ownership, vote on the important Debt holder don’t share in benefit decisions The corporation must pay all its debt directly from any increases in the holders before it pay its equity holders corporation’s profitability or asset value Q5: Exchanges and OTC markets: Exchange market is the financial market in which buyers and sellers of securities meet in one central location to conduct trade For example: the New York and American stock exchange OTC market is the financial market in which the dealers at different locations who have an inventory of securities stand ready to buy and sell securities OTC to any one 16 | P a g e ... Claim: a formal request for payment or services covered by insurance policy Unit 11 : MONEY AND ITS FUNCTION Q1 What are functions of money? Explain each function? The first function is money... life insurance policy, known as tax shelter Finally, tax deductibe means substracting a certain 11 | P a g e amount from taxable income - Avoiding tax on profits: Companies can bring forward capital... countries where taxes are low known as tax havens is a way to avoid taxes on profit Unit 10 : INSURANCE Q1: What is insurance in financial definition? - Insurance is the financial arrangement that