Tiếng anh chuyên ngành HỌC VIỆN TÀI CHÍNH

Nguyễn Thị Minh Thúy – CQ56/21.04CLC

Đề cương TACN 1
Microeconomics
- Definition: + Microeconomics studies behavior of individuas (consumers +
workers) and firms
+ ME studies how people choose to use limited resources to produce
goods and services to best satisfy their demand. Microeconomics analyzes how the
behavior of economic agents (consumers, firms) affect supply and demand for
goods and services.
- 3 themes: + the allocation of scarce resources
+ the role of prices
+ the role of the market
* The allocation of scarce resources:
- Peoples have to making choices because of the scarity of economy resources
such as limited income of consumers, the limited budget and technical knowledge
how that firms can use to produce things the limited number of hours in a week of
workers. But human demand is unlimited.
- “Trade-off” is a stituation in which you accept something you do not like or want
in order to have st that you want
- Ex for trade-offs made by consumers: Consumers trade-offs current consumption
for future consumption.
- Ex for trade-offs made by workers: Workers face trade-offs in their choice of
employment, trade-offs labor for leisure. (Workers face the limited time and tradeoffs working now or continued education; trade-offs working or leisure; trade-offs
working for a small or large company).
- Ex for trades-offs made by firms: Firms have to decide what to produce how to
produce, and for whom; base on their limited resources
- Consumer theory: describes how consumers maximize their well-being by
trading off the purchase of more of some goods with the purchase of less of others.
- The theory of the firm: (describes how trade-offs can be best made) describes
how firm makes optimal trade-off to maximize their profit.

* The role of prices:
- Prices are important because …
- All trade- offs are based on the prices faced by consumers, workers and firms.


Nguyễn Thị Minh Thúy – CQ56/21.04CLC

* The role of the market
- Prices are set by the Government.
- In the market economy, prices are determine by the law of supply and demand
(when orther things are the same: P increases => D decreases/ S increase ; D
increases => P will increases ; S increases => P decreases)
+ the interactions of consumers, workers and firms. These
interactions occur in market collections of buyer and seller that together determine
the price of a good.
+ Companies can compete freely (there is perfect competition)

Macroeconomics
- Definition: + Macroeconomics studies overall interactions among all economic
factors
+ Macroeconomics studies behavior of the entire eonomy or
international market place, behavior of Governments (visible hand) (invisible hand
– the market as a whole).
- Two major macroeconomics policies: Fiscal policy and Monetary policy
* Economic factors include:
- Economic growth
- Demand
- (Un)employment
- Supply
- Inflation

- Prices
- Economic policies
- Balance of payments
* Fiscal policy:
- Tools: taxation and Gov spending
- It is supervised by the Ministry Finance.
- Fiscal policy which controls a government revenue ans spending.
* Monetary policy:
- Tools: reserve requirement, discount rate, open market operation
- It is supervised by each country’s Central Bank.
- Monetary policy which controls a nation’s money supply.
* Objectives of macroeconomic policies are to:
- Promote economics growth.
- Keep inflation under control.
- Reduce unemployment.
- Balance of payment.
* The different between macroeconomics and microeconomics.
- Similarity:
+ Both of them are a branch of economics
+ Both of them study economic behaviour
+ There are many overlapping issues between the two fields


Nguyễn Thị Minh Thúy – CQ56/21.04CLC

-Difference:
Macroeconomics
- Behaviour of entire economy

Microeconomics

- Behaviour of individuals and
firms

- Object
-Economic
Agents - Central bank and Ministry of
finance
- Buyer and seller, workers,
- Goal
consumers and firms
- Control the inflation, promote
- Make regarding the allocation of
-Approach economic growth
resources and prices of goods and
services.
- Top-down approach.
- Bottom-up approach
The relationships between micro and macro is interdependent and complement one
another.

Public finance
- Definition: + Public finance is a branch of economics which studies how G raise
revenue and effect on spending.
+ Public finance concerned with G revenue, G spending and G
borrowing.
* Government revenue:
- Payroll taxes: (are taxes imposed on emloyers and workers) are the deduction
from wage of employees which both of employer and employee have to pay to
create trust funds.
- Individual income taxes: (are the tax imposed on individual incomes) are the tax

which charge on income of individuals.
- Corporate income taxes: (are imposed on corporate incomes) are the tax which
charge on profit of corporate.
- Custom duties: are the tax imposed on imports
- Excise taxes: are the tax imposed on specific goods such as wine, beer,
restaurant, hotel,…, and services.


Nguyễn Thị Minh Thúy – CQ56/21.04CLC

* Government spending:
- Trust funds: (specific revenue) are refer to funds which are generated from
payroll taxes
- Payroll taxes become trust funds. Trust funds are used for specific programs such
as :
+ Social security includes: pensions for retired people, benefits for social families,
support for victims of accidents, natural disasters,…
+ Medicare
- Federal funds: (general revenue) are used for infrastructure, salaries for state
employees, running the G body (annual spending).
- Income taxes and corporate taxes are designated as federal fund.
* Government borrowings:
- G. borrowing because all taxes for a given years are insufficient to cover all the
G.’s expenses, the Treasury borrows money to make up the difference.
+ G>T: when the G. spends more money than it can get from taxation.
+ T- Borrow by issuing and selling bonds
+ Selling directly: from the treasury through website: treasurydirect.gov
+ Selling indirectly: throught banks or brokers
- G. borrow from:

+ Domestic investors (Privates investors, Federal Reserve (Central Bank), State
and local governments).
+ International investors (Private investors, other governments, international
financial institutions (IMF/WB)).
-Federal Debt:
+ The federal debt: is the sum of the debt held by the public, plus the debt held by
federal accounts.
+ Debt held by the public: is the money borrowed from regular people like you
and from foreign countries.
+ Debt held by the federal accounts: is the amount of money that Treasury has
borrowed from itself (in case of the surplus of trust funds).


Nguyễn Thị Minh Thúy – CQ56/21.04CLC

Fiscal policy
- Definition: Fiscal policy: is a macroeconomic policy which uses government
spending and taxation to control the economy.
* Deficit spending:
- Definition: Deficit spending is spending funds obtained by borrowing and
printing instead of taxation.
Decifit spending can be eiher helpful or harmful to the economy
- Helpful: When unemployment rate is too high, it will create more jobs and the
economy will be growth because more money is being pumped into it.
- Harmful: When the employment is full, it may result in rising prices or inflation.
It creates more competition for scarce workers and resources.
* Conducting fiscal policy:
- Expansionary:
+ What: Fiscal policy is expansionary when taxation is reduced or public spending
is increased.

+ When: It occurs when a G feels its economy is not growing fast enough or
unemployment is too high.
+ Why: With the aim of stimulating total spending in the economy.
+ How: By increasing G spending, reducing tax rate, or both, the G leaves
individuals and businesses with more money to purchase goods or invest in new
equipment. With their purchases, they raise demand, which requires additional
production, creating jobs.
+ Result: Higher employment and a growing economy.
- Contractionary:
+ What: Fiscal policy is contractionary when taxation is increased or public
spending is reduced
+ When: It occurs when economy is overheating and inflation is too high.
+ Why: Is used to slow down the economy.
+ How: Raises taxes and cut spending.
+ Result: Decreasing spending, demand and untimately, pressure on price.
* Influencing factors on decisions on fiscal policy
- Inside factors include:
+ Unemployment rate.


Nguyễn Thị Minh Thúy – CQ56/21.04CLC

+ Infaltion rate.
+ Level of economic growth
+ Political consideration.
=> When unemployemnt rate is high or there is a recession, the G will use
expansionary fiscal policy to raise demand.
- Outside factors include:
+ Fiscal policy of other country.
+ Requirements of the International Moneytary Fund (IMF)

=>When Gs of strong economies use contractionary fiscal policy, it will decrese
investment rate of those countries.
1.Under what circumstances can fiscal policy be expansionary? Why?
When the economy is not growing fast enough or unemployment is too high, the
expansionary fiscal policy may striggle more spending throughout reducing taxes or increasing
public speding.
2. Under what circumstances can fiscal policy be contractionary? Why?
When the economy needs to slow down or demand needs to be restricted, the contractionary
fiscal policy reduces the amount of money in the economy throughout reducing public spending
or increasing taxes.

Monetary policy
- Definition: Monetary policy is a government policy related to a nation’s money
supply by each country’s central bank.
* Objectives of Monetary policy:
- To manage inflation
- To reduce unemployment
- To promote moderate long-term interest rates
* Tools of Monetary policy: three tools
- Reserve requirement:
+ It is the percentage the Central Bank sets as the minimum amount of reserves as
bank must have.
+ It plays a central role in how much money banks have to lend out.
+ By changing the reserve requirements, government can increase or decrease the
money supply.
If the government increase the reserve requirement, it contracts the money supply;
banks have kept more reserves so they have less money to lend out.
- Discount rate:
+ It is the rate of interest government charges for loans that a bank can go to its
bank and take a loan.

+ An increase in the discount rate makes it more expensive for banks to borrow
from government. A decrease in the discount rate makes it less expensive for
banks to borrow.


Nguyễn Thị Minh Thúy – CQ56/21.04CLC

- Open market operations:
+ It is the government’s buying and selling government securities.
+ To expand the money supply, the government buys bonds. To contract the
money supply, the government sells bonds.
* Control over the money supply of Central Bank (Conducting M.P of
Central Bank)
- Expansionary monetary policy: Means the central bank decrease reserve
requirement, discount rate or buying more bonds. It can increase bank lending
capacity.
+ When: When the economy slows down. (High unemployment rate, low
investment rate)
+ What: Use to increase the money supply and to promote economic growth.
+ Why: Is used to promote the economy, to raise demand, to create jobs.
+ How: If the C.B lowers reserves requirements, drops the discount rate, or buy
more bonds, it will increase bank lending capacity. The banks in turn will try to
use that expanded capacity and make more loans.
+ Effect: It causes the demand curve shift to the right.
- Restrictive monetary policy: Means the central bank increase reserve
requirement, discount rate, or selling more bonds.
It can reduce investment, consumption or even government expenditure.
+ When: When the economy is overheating. The inflation is high.
+ What: Use to decrease the money supply and to cool an overheating economy.
+ Why: Is to used cool an overheating economy. To decrease inflation.

+ How: The Central bank can reduce money: rasing reserve requirements,
increasing the discount rate, selling bonds in the open market.
+ Effect: It causes the demand curve shift to the left.

Financial markets
- Definition: + Financial markets are the markets in which securities are traded
financial instruments: shares, bonds, mortages, checks, commercial papers,
banker’s acceptance, certificate of deposit, and so on.
+ Function of the financial market is transfering funds from those
who have saved surplus funds to those who have a shortage of funds.
* Money markets: 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).
- Short-term instruments:
+ government bonds
+ corporate bonds
+ interbank lening


Nguyễn Thị Minh Thúy – CQ56/21.04CLC

* Capital markets: Capital market is a financial market in which long-term debt
and equity instruments are traded. Including:
+ long-term government bonds
+ long-term corporate bonds
+ shares (stocks)
(Money and Capital markets based on securities type)
* Primary markets:
- It is a financial market in which new issues securities are sold to initial buyers by
the corporation or G. agency borrowing funds.(It is the market in which fresh

securities are sold). Including:
+ Investment banks
+ Stock companies
+ Insurance companies
- It is not well known to the public. Because the selling of securities take place
behind closed doors.
- Role of Primary markets: to increase the issuers’ capital.(Function of primary
market is to raise fund for issue of firms)
- Issuers including:
+ Corporations
+ Government
+ Financial institutions
* Secondary markets:
- It is a financial market in which securities that issued can be have been
previously resold. (It is the market in which fresh securities are sold).
- It is well known to the public.
- It is not increase the issuers’ capital.
- Roles of Secondary markets:
+ Make it easier and quicker to sell financial instruments to raise cash. (Make
long-term instruments more liquid).
+ Help determine the prices of fresh securities in primary market.
(Primary and Secondary markets are baesd on the market level)
* Exchanges markets: Exchange market is the financial market in which buyers
and sellers of securities meet in one central location to conduct trade.
(It is the centralized market in which listed securities are traded)
(Transactions are made in a single location (called the trading floor); during fixed
hours (called the trading session))
* OTC markets (over-the-counter): 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.

(It is the decentralized market in which unlisted securities are traded)
(Transactions are made via means of communication and throughout the day)
(Exchanges and OTC markets are based on legal nature)


Nguyễn Thị Minh Thúy – CQ56/21.04CLC

* Debt markets: Debt market is a financial market in which debt instruments like
bonds, mortages are traded.
- Include: short term, long term, and intermediate term.
- Advantage: Debt holder receive predetermined fixed interest rate. (fixed interests
to creditors (debt holders)).
- Disadvantage: Debt holder don’t share in benefit directly from any increases in
the corporation’s profitability or asset value.
* Equity markets: Equity market is a financial market in which equity instrument,
such as common stock (shares) is traded.
- Include: Equity instruments are consider as long term ones. Because they don’t
have maturity date.
- Advantage: + Equity holder benefit directly from any increases in the
corporation’s profitability or asset value .
+ Equity holders get dividends share ownership, vote on the
important decisions (flexible dividends to shareholder).
- Disadvantage: The corporation must pay all its debt holders before it pay its
equity holders.
(Debt and Equity markets are based on ownership of financial instruments)
* Foreign exchange markets: (nationl currencies)
- Spot markets
- Future markets: + Role of future markets: Help to protect the anticipated flow of
currency against exchange rate volatility.

• Some definitions:
- Inflation: iss a continuing increase in prices of goods and services in the period
time.
- Balance of payment: is the differences between export and import.
- Overheating economy: is an economy that is growing very quickly with risk of
high inflation.
- Deficit: taxation in a year is insufficient for G spending. (the G spends more than it
receives).
- Securities: is a term for a variety of financail assets.
- GDP stand for Gross Domestic Product: is the total value of everthing produced in
the country. It doesn’t matter if it’s produced by citizens or foreigners.