UNIT 1: MICROECONOMICS

1. What does microeconomics study?

-Economics studies how people choose to use limited resources to produce goods and services in
order to best satisfy human demand. Resources consist of natural resources such as land, oil,
coal, wind, solar energy and so on….; human resources including time, talent, knowledge,
technology, inventions and capital such as physical assets (buildings, equipment ) and financial
assets (shares, bonds, accounts, investments). All these resources are limited/ scarce while
human demand is unlimited. That’s why it’s necessary to study economics. And economists
study economic phenomena by 2 different avenues: microeconomics and macroeconomics.
2. What does microeconomics study?
-Microeconomics is a branch of economics that studies how consumers, workers and firms
behave while making decisions on the allocation of their scarce resources. Because their
resources are limited so all consumers, workers and firms have to make trade-offs. For example,
first, consumers have to trade off the purchase of more of some goods with the purchase of less
of others. Second, workers have to make choice of employment, employer (who to work for),
and how many hours for work. Last, firms have to decide what to produce, how to produce and
for whom to produce.
- Microeconomics also studies other important themes such as the role of prices and the role of
markets in the economy.
3. What are three themes of microeconomics?
- Three themes of microeconomics are the allocation of scarce resources, the role of prices and
the role of the market.
4. What are trade-offs?
- A trade-off is a situation where you make a compromise between 2 things, or where you
exchange all or part of one thing to another.
5. Why do consumers, workers or firms have to make trade-offs?
- Because their resources are limited, whereas/ while their demand is unlimited.
6. What are the limits of consumers?
- Consumers have limited incomes. The consumer theory describes how consumers can best
make trade-offs based on their limited resources and preferences. For example, they may trade
off the purchase of more of some goods with the purchase of less of others. Another example
may be trading off current consumption for future.
7. Give some examples explaining the trade-offs made by consumers? How do consumers
have to make trade-offs based on their preference and their limited incomes?
- One example is that consumers have to trade off the purchase of more of some goods with the
purchase of less of others.
- Consumers will decide how much of their incomes to save, thereby trading off current
consumption for future consumption.
8. What does the consumer theory describe?
- Consumer theory describes how consumers can best make trade-offs based on their preferences
and their limited budgets to maximize their well-being.
9. What are limits of workers?
- Resources of workers are their time and talent, knowledge, working experience, and so on...
All these resources are limited, so they have to make trade-offs. For example, they have to
 decide when to enter the workforce (when finishing high schools or graduating from
universities), which job to do, who to work for. They can choose to work for large companies
with job security but limited potential for advancement or for small companies with more
opportunity for advancement but less security. They also have to decide how many hours for
work and how many hours for leisure and so on.
10. What are the limits of firms?
- Resources of firms are human resources, financial resources, production capacity, technology,
management ability, reputation (trade mark), brands, and so on. These resources are scarce so
companies have to make trade-offs. They have to decide what to produce, how to produce and
for whom to produce. For example, (lấy ví dụ về 1 công ty cụ thể). Thus, the theory of the firm
describes how companies can best make trade-offs.
11. How are prices important?
- Prices influence all trade-offs made by consumers, workers and firms. For example, when
prices of a good increase, consumers tend to buy substitutes even they don’t prefer them.
Workers choose employment depending partly on salaries paid to them. And, a firm’s decisions
such as buying more machinery or employing more workers depend partly on prices of those
machines or salaries paid to those workers.
12. How prices are determined in the centrally planned economy?
- In centrally planned economy, prices are set by government.
13. How prices are determined in the market economy?
- In a market economy, prices are set by the interactions of consumers, workers and firms.
These interactions occur in markets – collections of buyers and sellers that together determine
the price of a good.
UNIT 2: MACROECONOMICS
1. What does macroeconomics?
- Macroeconomics is the branch of economics that studies the role of both markets (the invisible hand)
and governments (the visible hand) in the economy. Specifically, macroeconomics studies interactions
among all economic factors such as economic growth, inflation, employment and so on, as well as
economic relations between different countries in the world. / as well as international marketplace.
- Moreover, macroeconomics also studies the regulation of the economy by the government. Usually,
the government uses macroeconomics policies such as fiscal policy and monetary policy to promote the
economic growth, to reduce unemployment and to control inflation.
2. What are the main objectives of macroeconomics policies?
- Macroeconomics is influenced mainly by two macroeconomics policies, including monetary policy
and fiscal policy. The basic objectives of they are to promote economic growth and to keep inflation
under control.
3. What is monetary policy? (Who supervised and what to control)
- Monetary policy which controls a nation’s money supply is supervised by each country’s Central
Bank.
4. What is the main tools of monetary policy? How does it work?
- Tools of Monetary policy are Reserve requirement, Discount rate, and Open market operations, which
are supervised by the Central bank. Central banks control the economy by increasing or decreasing the
money supply. By carefully regulating the supply of money to fuel economic growth, a central bank
works to keep the economy from overheating or slowing down too quickly
5. What is fiscal policy? (Who supervised and what to control)
- Fiscal policy which controls a government's revenue and spending is in the hand of the Ministry of
Finance.
6. What is the main tools of fiscal policy? How does it work?
- The tools of fiscal policy are government revenue (taxes) and spending. Taxation and government
spending greatly influence a country’s economic growth. A nation’s economic health is influenced by
governmental fiscal policies, such as taxation, spending and government borrowing.
7. What are differences between microeconomics and macroeconomics?
Microeconomics Macroeconomics
- studies behavior of consumers, workers - studies the interactions among all economic
and firms factors (the role of markets in the economy), the role
of governments in the economy, as well as economic
relations between different countries in the world.
- Macro focuses on how governments use their
macroeconomic policies to regulate the economy.
- Micro focuses on theories of consumers,
workers and firms - The economy is influenced by both the market
(invisible hand) and the government (visible hand)

- Behavior of individuals and firms are

influenced by prices and other forces in the
markets as well as by decisions of the
government.
UNIT 3: PUBLIC FINANCE
1. What is public finance?
- PUBIC FINANCE is study of finance related to government entities. Public finance implies a branch
of economic, which is concern with government activities and various sources of financing expenditure
-It revolves around the role of government income and spending in the economy.
2. Where does the government’s revenue come from?
-There are two main sources: Tax revenue and Borrowing
+Tax revenue (Income taxes paid by individual; Payroll taxes paid by workers and employers;
Corporate income taxes paid by businesses; Other taxes: customs duties and excise taxes)
+The second main source of Revenue is Borrowing. Government borrows money by issuing bonds and
other types of securities.
3. What are payroll taxes?
-Payroll taxes include social insurance and health insurance as percentages of wages or salaries and
they are paid jointly by both employers and employees.
4. What are individual income taxes?
-Individual income taxes are the taxes levied/ imposed on wages or salaries or dividends and other
incomes that a person earns.
-Personal income taxes are the taxes imposed on personal incomes.
5. What are corporate income taxes?
-Corporate income taxes are the taxes imposed on corporate incomes.
6. What are customs duties?
-Customs duty is the tax imposed on imports and exports.
-Customs duty is the tax that governments impose on export and import of goods.
-Customs Duty is levied when goods are transported across borders between countries. It is the tax that
governments impose on export and import of goods. Customs Duty is beneficial for many reasons. For
instance, it ensures a country’s economic stability, jobs, environment, among others. It regulates the
movement of goods in and out of the country. It keeps a check on restricted items.
7. What are excise taxes?
-An excise tax is a tax imposed on specific goods or services at purchase such as fuel, tobacco, and
alcohol.
- An excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on
cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting,
and make up a relatively small and volatile portion of state and local tax collections.
 8. What are 2 main types of the government’s tax revenue/ revenue from taxation?
-2 main types of the government’s tax revenue are trust funds and federal funds.
9. What are trust funds?
-Trust funds are the government’s revenue that comes from payroll taxes / that is generated from
payroll taxes, used for specific programmes
10. How are trust funds used? / What are trust funds spent on?
-Trust funds are only spent on Social Security and Medicare.
-The financial authority is to impose a levy on every financial product sold. be exempt from/pay a levy:
được miễn
-Social Security income that resides in a bank account is exempt from a levy.
=>Trust funds are the government’s revenue that comes from payroll taxes / that is generated from
payroll taxes
11. How does the government use federal funds? How are federal funds used?
- Federal funds are used for/ spent on the G’s projects and programs including capital spending and
current spending.
12. Why/For what purpose does the G have to borrow more money?
- Because the G wants to spend more money than it can collects from taxation/ The G has to borrow
more money to finance (v, bổ trợ) the budget deficit.
13. What is deficit spending?
- Deficit spending occurs when a government spends more money than it receives in revenue,
typically through taxes. To cover the gap between spending and revenue, the government borrows
money, often by issuing bonds. This approach is commonly used to stimulate economic growth during
periods of recession or economic downturn by increasing public spending to boost demand, even if it
results in a budget deficit.
14. How does the government raise its revenue?
- The government raises its revenue primarily through taxation. This includes taxes on income, sales,
property, and corporate profits. Additionally, governments may collect revenue through customs duties
(thuế quan), excise taxes (thuế tiêu thụ đặc biệt), and fees for services like licenses and permits. (giấy
phép và giấy tờ)
15. How does the government allocate its revenue from taxation?
- The government allocates its revenue to various public services and infrastructure projects. This
includes funding for healthcare, education, defense, social welfare programs, public safety,
transportation, and other essential services. The allocation is typically outlined (thường được nêu ra) in
the government's budget and reflects the priorities set by policymakers.
 16. How does the government borrow more money? From whom does the govern borrow
money?
- The government borrows money by issuing debt securities (phát hành chứng khoán nợ), such as
bonds and treasury bills. These are sold to investors, which can include individuals, corporations,
banks, and foreign governments. In essence (về bản chất), the government is borrowing money from
these individuals with a promise (lời hứa) to repay it with interest at a later date.
17. What are three main functions of public finance?
- Public finance performs 3 major functions of resource allocation, income redistribution and economic
stabilization.
18. What are different sources of money that the government can borrow from?
- The government can borrow money from the surplus of trust funds which are called debts held by
federal accounts. The government can also borrow money from the public which are called debts held
by the public (inside investors and international investors)
-They are debt held by the public and debt held by federal accounts
-Debt held by the public: is the total amount of money government borrows from general public,
including individuals, organizations such as central banks of other countries.
-Debt held by federal accounts: is the total amount of money government borrows from itself when
trust fund runs a surplus.
19. What are progressive taxes?
-Progressive taxes are the taxes imposed at higher tax rates on higher incomes (taxable mone)
20. What are regressive taxes?
-A regressive tax is the tax imposed at the same tax rates for both the poor and the rich.
21. What is the debt held by federal accounts? Debt held by the public?
-Debt held by the public is the total amount of money government borrows from general public,
including individuals, organizations such as central banks of other countries.
-Debt held by federal accounts is the total amount of money government borrows from itself when trust
fund runs a surplus.
UNIT 4: FISCAL POLICY
1. What is fiscal policy?
- Fiscal policy is the government's use of spending and taxation to influence the economy,
including decisions on how much to spend, how much to tax, and how to allocate resources to
achieve economic objectives like growth, stability, and employment.
2. What are 2 main tools of fiscal policy?
- Two main of fiscal policy consists of Government spending and Taxation
3. What are stances of fiscal policy?
- G > T (If the government spends more than it can collect from taxation, fiscal policy is in
deficit.)
- G < T (If the government spends less than it can collect from taxation, fiscal policy is in
surplus.)
- G = T (If the government spends the same amount of money as it collects from taxation, fiscal
policy is balanced/ neutral/ in balance.)
4. What is expansionary fiscal policy?
- Fiscal policy is expansionary when the government increases its spending and/or reduces
taxation.
5. What will happen if the government reduces taxes?
- If the government reduces taxes, households and firms will have more of their incomes (after-
tax incomes/ profits) to spend on goods & services or on investments, leading to increasing
demand and production. More production will create more jobs so the unemployment rate will
reduce. Thus, the economy tends to grow.
6. What will happen if the government increases its spending?
- When the government increases its spending, for example, on building a new highway, the
construction will creates more jobs and incomes for both individuals and firms. Thus, the
unemployment rate will reduce and the economy tends to grow.
7. What are the objectives of expansionary fiscal policy?
- The objectives of expansionary fiscal policy are to promote economic growth and to reduce
unemployment rate.
8. What can the government do if it wants to promote economic growth?
-If the government wants to promote economic growth, it can run expansionary fiscal policy,
specifically by increasing government spending or reducing taxes or combining both of them.
9. What is expansionary fiscal policy? Under what circumstance (When) should the
government run expansionary fiscal policy? (G;T)
-Fiscal policy is expansionary when the G increases its spending or reduces taxation or
combines both of them.
-When economic growth rate is low, or unemployment rate is high, the government should run
expansionary fiscal policy. For example, when the government borrow more money to build a
new road, the construction creates more jobs for local people who are idle, so the unemployment
rate is reduced. The construction also brings more incomes for both companies and workers.
With more incomes, they tend to spend more, leading to more production of goods and services,
and then the economy tends to grow.
10. What is contractionary fiscal policy?
 - Fiscal policy is contractionary when the government decreases its spending and/or increases
taxation. (G; T)
11. What are objectives of a contractionary fiscal policy?
-Objective of a contractionary fiscal policy is to keep inflation under control/ to control
inflation.
12. When should the government run contractionary fiscal policy? Why?
- The government conduct contractionary fiscal policy when inflation rate is high. For example,
when the government increase income tax rates, both workers and firms will have less
money to spend or invest, so the aggregate demand will reduce. This will then reduce
pressure on prices, and inflation tends to reduce.
13. What will happen if the government reduces its spending?
- When the government reduces its spending, AD (aggregate demand) will reduce, leading to
reduced pressure on prices, thus inflation tends to reduce.
14. What will happen if the government increases taxation?
- When the government increases taxation, firms and individuals will have less of their incomes,
then they reduce their demand, leading to reduced pressure on prices, thus inflation tends to
reduce.
15. What can the government do if it wants to reduce inflation?/ make the economy shrink?
slow down the economy?
- If the government wants to slow down the economy, it can run contractionary fiscal policy,
specifically by decreasing government expenditure/ spending or increasing taxes or combining
both of them.
16. What is deficit spending/ deficit budgeting?
- Deficit spending means spending funds obtained by borrowing or printing instead of taxation
17. What are the objectives of deficit spending?
- Objectives of deficit spending are to promote economic growth, to increase employment or
to keep inflation under control.
18. Is deficit spending harmful or helpful for the economy? And why?
-Deficit spending can be either helpful or harmful for the economy, (which depends) depending
on specific economic situation/ circumstances.
- Helpful in times of high unemployment/ low economic growth rate
+ Purposes of creating more jobs and increasing levels of economic activity => promote
economic growth.
- Harmful in times of low unemployment and high inflation
+ Because deficit spending cause inflation to rise.
 Deficit spending is helpful when unemployment rate high because in this case, government
pumps more money to undertake government programs such as building new roads, it can
create jobs for unemployed people
 Deficit spending is harmful when unemployment rate is low because in this case,
government pumps more money into the market, it can increase competition for scarce labor,
increase income, increase inflation.
19. What are major objectives of fiscal policy and monetary policy?
-3 major objectives:
+To reduce unemployment rate.
 +To promote economic growth
+To keep inflation under control = To control inflation
19. What are progressive taxes?
- Progressive taxes are the taxes imposed at higher tax rates on higher incomes (taxable mone)
22. What are regressive taxes?
- A regressive tax is the tax imposed at the same tax rates for both the poor and the rich.
23. What are factors affecting decisions on fiscal policy?
- Internal factors:
+Economic factors: Level of economic growth, unemployment, inflation can affect
Government’s revenue or Government’s spending.
+Noneconomic factors: Politic consideration,…
-External factors:
+Fiscal policies of other countries
+Requirement of IMF or world bank, which often grants aid packages subject to conditions
relating to fiscal policy.
24. What is the deficit? How does the Government finance the deficit?
-Deficit happens when the Government spent more than it receives.
-Deficit can be financed in 2 ways: borrowing or printing money. If the Government borrows
money, it will reduce the supply of money in the economy. If the Government prints more
money, it will increase the supply of money in the economy.
 UNIT 5: MONETARY POLICY
1. What is monetary policy?
- Monetary Policy is one of the major macroeconomic policies which controls/ manages the
money supply and is supervised by the Central bank.
2. What are three main objectives of monetary policy?
- Central banks have three monetary policy objectives. The most important is to manage
inflation. The secondary objective is to reduce unemployment, but only after controlling
inflation. The third objective is to promote moderate long-term interest rates.
3. What is reserve requirements?
- Reserve requirement is/ refers to a percentage of deposits that the central bank sets as the
minimum amount of reserves as banks must have
(Reserve requirement is/ refers to a percentage of deposits that the central bank requires
other banks to keep in reserve.)
4. What are some significances of reserve requirement?
- The amount banks must keep in reserve depends on the Fed requirements and partly on
how much banks feel they need for safety
- The amount most banks need for safety is much smaller than what the Fed requires
5. What happen if RR?
- If the Fed increases the reserve requirement, it contracts (reduces – decreases) the money
supply; banks have to keep more in reserve so they have less money to lend out.
6. What happen if RR ?
- If the Fed decreases the reserve requirement, it increases the money supply; banks have to
keep less in reserve so they have more money to lend out.
7. What is discount rate?
- The discount rate is the rate of interest that the central bank of a country charges on the
loans that it makes to other banks.
8. What are some significances of discount rate?
- A bank (Banks) can go to its bank (the Fed, the banker’s bank) and take a loan. The
discount rate is the rate of interest the Fed charges for those loans.
9. What happen if DR ?
- An increase in the discount rate makes it more expensive for banks to borrow from the Fed
10. What happen if DR ?
- A decrease in the discount rate makes it less expensive for banks to borrow.
11. What is open market operations?
- Open market operations mean the central bank’s buying and selling government securities
on the open market.
- They are the primary tool of monetary policy
12. What happen if selling G. securities?
- When Fed sells G. securities, it collects back some of its IOUs, reducing banking system
reserves and decreasing the money supply
13. What happen if buying G. securities?
- When Fed buys G. securities, it disperses (phân tán, rải rác) some of its IOUS, increasing
baking system reserves as well as the money supply
 (An IOU is a written promise that you will pay back some money that you have borrowed.
IOU is an abbreviation for 'I owe you'. – Vay nợ )
14. What is an expansionary monetary policy?
- Monetary policy is expansionary when the Central Bank lowers/ reduces/ decreases reserve
requirements or discount rates or buy more bonds
15. What are objectives of an expansionary monetary policy?
- The objectives of an expansionary monetary policy are to promote economic growth, and to
increase employment
16. What is a restrictive monetary policy?
- Monetary policy is restrictive when the central bank increases reserve requirements or
discount rates or sell more bonds.
17. What are objectives of a restrictive monetary policy?
- The objective of a restrictive monetary policy is to reduce inflation rate/ control inflation.
18. When should the Monetary Policy be expansionary? Why?
- Monetary policy should be expansionary when the economic growth rate is low or
unemployment rate is high. For example, when the central bank reduces reserve requirement,
or discount rate or buys government bonds, this will increase the bank lending capacity or
increase money in the circulation. The increased money supply encourage spending, leading
to more investment and production of goods and services, the economy then tends to grow.
19. When should the Monetary Policy be restrictive? Why?
- Monetary policy should be restrictive when the economy is overheating or inflation rate is
high. For example, when the central bank increases reserve requirement, or discount rate or
sells government bonds, these actions will reduce the bank lending capacity or reduce the
money supply, leading to reduced investment and consumption. When the aggregate demand
reduces, the prices of goods and services tend to reduce, and inflation rate is likely to reduce.
UNIT 6: FOREIGN EXCHANGE MARKET
1.What is the definition of “exchange rate”?
-Exchange rate: is the rate at which the currency of one country or region can be exchanged
for that of(=currency) another country or region- tỷ giá hối đoái
Note: another không đi với danh từ số nhiều
2. What is future market?
-Future markets are where you can buy currency at the given exchange rate but that currency
is delivered to you at some time in the future.
3.What are bid rates/ buying rates?
-Bid rate is the rate at which the dealer (mostly banks) buys foreign currency( đồng tiền ngoại
hối)- tỷ giá mua vào
4.What are offer rates/ selling rates?
-Offer rate/ Ask rate/ Selling rate is the rate at which dealer (mostly banks) sells foreign
currency-> tỷ giá bán ra
=>bid rate: đi với buy, offer rate: đi với sell
5.What are foreign exchange markets?
- The foreign exchange market is the market in which such national currencies as dollars,
pesos, deutschemarks, yen, francs, and others are exchanged.
6.How do banks (dealers) make profits from exchanging foreign currencies?/ from the
exchange of foreign currencies?
-Banks (dealers) make profits from the differences between offer (selling) rates and bid
(buying) rates.
-Selling rates are often a little higher than buying rates, so that banks can make profits. (giá
bán cao hơn giá mua một chút)
7.What does the noun “exchange” mean?
- Exchange (n): the process of changing one currency for another
8.The roles of Foreign exchange markets
-The foreign exchange market enables banks and international corporations to trade foreign
currencies in large amounts. Capital flows arising from trade in goods and services,
international investment and loans together create this demand for foreign currency.
9.What is foreign exchange market (Forex)?
-F.E.M is the market in which national currencies such as dollars, yén, vietnamdong,
korea won are exchanged.
-Foreign exchange market is an OTC market
10. Based on the operation of the markets, how are financial markets classified?
-Based on the operation of the markets, financial markets can be divided into:
+ OTC markets – thị trường phi tập trung
+Organized markets – thị trường tập trung
11. What does OTC stand for?
-OTC stands for “over-the-counter”- phi tập trung
12. What is an OTC (over-the-counter) market? Thị trường phi tập trung là gì? / What are
features of an OTC market?
- An OTC market is the market in which transactions (các giao dịch) are made throughout the
day and via communication instruments such as telephone or computer link.
- An OTC market is the market which hasn’t got fixed hours (trading sessions) or a physical
meeting place (trading floor)
13. What is an organized market? – Thị trường tập trung
-An organized market is the market with fixed hours (called trading sessions – phiên giao
dịch), and a physical place (called trading floors – sàn giao dịch)
14. What are different types of transactions in a foreign exchange market?
-2 types of transactions in Forex are spot transactions and forward transactions
15. What are spot transactions? (giao dich ngay/ giao dịch tức thì)
- Spot transactions are undertaken an actual exchange (n) of currencies 2 business days
(working days) later (after the ordering day)
- Spot transactions involve the actual delivery date 2 working days later.
- When the buyer orders an amount of a foreign currency, the actual exchange will be
undertaken/ made 2 working days later.
-Foreign exchange department – phòng giao dịch ngoại hối
16. What are forward transactions? (giao dịch có kỳ hạn)
- Forward transactions involve a delivery date further into the future.
- Forward transactions are transactions which will be undertaken an actual exchange of
currencies in the future.
17. What is the significance/ purpose of forward transactions? (ý nghĩa của giao dịch có kỳ
hạn)
- Forward transactions help to protect the value of anticipated flows of foreign currencies from
exchange rate volatility.
18. What is one of reasons for the development of Forex?/ What promote the development/
expansion of Forex?
- The development of world trade (thương mại thế giới)
- The expansion of international capital flows (các luồng vốn quốc tế)
19. What are two types of foreign exchange trading (transactions)? How are currencies
exchanged with each of these two types?
- Foreign exchange trading is divided into two types: spot transactions and forward
transactions. Spot transactions are undertaken for an actual exchange of currencies 2 business
days later. While forward transactions involve a delivery date further into the future. Forward
 transactions help to protect the value of anticipated flows of foreign currencies from exchange
rate volatility. (sự thay đổi của tỉ giá hối đoái)
20. Why is London the world’s largest foreign exchange center?
- London is the world’s largest foreign exchange center because of 2 reasons.
+ Firstly, the large volume of international financial business is generated in London such as
insurance, Eurobonds, banking and so on.
+ Secondly, London benefits from its geographical location which enables it to trade with
many cities in the whole world, not only in Europe, but also in Asia, America and so on.
21. What are 4 types of participants (đối tượng tham gia) in Forex?
There are four types of participants
- The market maker is the central bank of each country. They establish the market and
supervise the market operations by quoting the frame of exchange rates at any time.
- The dealers are banks and some other organizations. / Banks act as dealers in the market.
They buy or sell foreign currencies to make profits based on the differences between buying
rates (bid rates) and selling rates (offer rates).
- Customers can be multinational corporations, importers and exporters, or individuals.
For example,
+ multinational corporations have demand of / need foreign currencies for the acquisition of
financial and real assets between parents companies and their subsidiaries. (công ty con)
While
+ importers and exporters have demand of foreign currencies for making or receiving
payments for imports/ exports.
And, Besides,
+ individuals can be customers who need foreign currencies for their trips abroad, or for the
purpose of saving.
The brokers are specialist companies who act as consultants (người tư vấn) for both banks
and customers. They don’t deal on their own accounts, but they charge commission for their
consultancy. They give advice/ consultancy on exchange rates for their customers.
-consultancy: dịch vụ tư vấn
22. What are the roles of foreign exchange market?
- The foreign exchange market enables banks and international corporations to trade foreign
currencies in large amounts. Capital flows arising from trading in goods and services,
international investment and loans together create this demand for foreign currency.
23. Why is foreign exchange market to be an OTC market?
- Because it is not an organized market with fixed hours and physical meeting place.
UNIT 5: FINANCE MARKET
1. Based on types of financial instruments, how are securities markets classified?
They are classified into equity markets and debt markets
2. How can the debt instruments can be classified?
Based on their maturity, debt instruments can be classified into: short-term, intermediate-term and long
term ones.
3. What are equity markets?- thị trường vốn cổ phần
Equity markets are the markets in which equity instruments (shares) are traded. Equities are long-term
securities because they have no maturity date.
When an investor buys common stock of a company, he becomes the shareholder of the company and
receives dividends (cổ tức) from the company. The shareholders can’t get back their money from the
company, but they can sell their shares in the securities markets for money.
The shareholders have the right to vote on issues important to the firm and to elect its directors.
4. What are debt markets?
Debt markets are the markets in which debt instruments (công cụ nợ) are traded. Debt instruments can
be bonds or mortgages. Debt instruments can be short-term (with the maturity of less than one year),
intermediate-term (with the maturity between one year and ten years), and long-term (with the maturity
of more than 10 years)
When an investor buys bonds of a company, he becomes the bondholder (the creditor) of the company.
And he receives fixed amounts of money including interest and principal payments at regular intervals
until the maturity date.
The creditors have no right to vote on any issues of the company.
5. What are primary markets?
Primary markets are the markets in which new issues of a security (fresh securities) are issued and sold
to initial buyers (investment banks who underwrite fresh securities – to guarantee the prices of a
company’s securities and sell them to the public)
6. What are secondary markets?
-Secondary markets are markets in which previously issued securities (outstanding securities) are
traded/ resold. These markets don’t help issuers to raise more money, but they make securities more
liquid and desirable.
-Investors are willing to buy securities because they know that they can sell them to others in the
secondary market for money whenever they want.
-Secondary markets are more important because of 2 reasons (xem lại trong giáo trình)
+Secondary markets determine the prices of fresh securities;
+And they make securities more liquid and desirable.
 7. How are secondary markets important to issuers? What is the role of secondary markets to
issuers?
-Although these markets don’t help issuers to raise more funds, they make securities more liquid and
desirable.
Something is liquid means that it is easily converted into cash.
Secondary markets determine (chi phối) the operation of primary markets.
Whether the issuers can issue fresh securities and sell them in primary markets or not depending on
prices of these securities in secondary markets.
8. What types of markets are more popular for investors? Why?
Secondary markets are more popular because they can buy or sell outstanding securities in secondary
markets, but not in primary markets.
What is the securities market?
The securities market is the market in which securities such as bonds or shares are traded/ exchanged.
9. What are different ways of classifying securities markets?
There are 4 ways of classifying securities markets into:
-Debt markets & equity markets
-Primary markets and secondary markets
-Secondary markets are further classified into Exchanges and OTC markets
-Money markets and capital markets
10. What are benefits for the creditors who buy debt instruments?
- Creditors receive regular fixed interest payments from the issuers of debt instruments. These
payments are pre-determined and not due to the economic situation or performance of the issuers.
11. What is the maturity of equities?
Equities are considered long-term financial instruments because they have no maturity, because
shareholders can’t get back their money from the issuers (firms) but they can sell their shares to others
in secondary markets to get back their money.
12. What are benefits for the shareholders?
- Shareholders can get flexible regular dividends from the firms. Furthermore, they hope to make a
profit from increases in prices of their shares in secondary markets.
- Shareholders also have the right to vote for important issues of the company.
13. What are main differences between debt markets and equity markets?
-There are some main differences between debt markets and equity markets as follows:
(Debt markets and equity markets can be distinguished based on some main categories as follows:)
Firstly, in debt markets, debt instruments such as bonds, mortgages, certificates and so on are traded,
whereas equity instruments or shares are traded in equity markets. Secondly, if the issuers such as
corporations or governments want to raise more debt, they can issue debt instruments, and if
corporations want to raise more equity they can issue equity instruments.
The other difference between debt markets and equity market is related to benefits for debt holders and
equity holders. By buying debt instruments, creditors get fixed interest payments from the issuers,
while shareholders can get flexible dividends from issuers when they buy shares.
14. Can you make a comparison between benefits for the creditors and shareholders?
Now that we understand the basic function of financial markets, let's look at their structure. The
following descriptions of several categorizations of financial markets illustrate essential features of
these markets.
15. What is financial market?
Financial market is the market in which financial instruments or valuable papers are exchanged
16. What is the main function of financial markets?
-Financial markets perform the essential economic function of channeling funds from households,
firms, and governments that have saved surplus funds by spending less than their income to those that
have a shortage of funds because they wish to spend more than their income.
17. What are securities?
-Securities are mostly shares and bonds and other valuable papers.
18. What are debt instruments?
-Debt instruments are fixed interests to creditors
19. Who are share holders?
-Share holders, who have a stake in the business or share of the business, are paid dividends.de.
20. How can banks and corporations benefit from the money market? / What are benefits of the
money market for banks and corporations?
-They can earn interests on temporary surplus funds by trading short-term debt instruments in the
money market.
21. What are short term debt instruments?
-Intermediate-term debt instruments are instruments which have maturity of less than 1 year
22. What are long term debt instruments?
-Long term debt instruments are instruments which have a maturity of 10 years or longer.
23. What is the intermediate-term debt instrument?
-Intermediate-term debt instrument is the one whose maturity is between 1 to 10 years
24. What do debt instruments include?
-Debt instruments include bonds mortgages, loans, certificates of deposits and so on
25. What can the debtholders (creditors) receive from the debt issuers/ receive for holding debt
instruments?
-They receive fixed regular interest payments
26. Who are debt issuers?
-Debt issuers can be governments and firms.
+Governments issue debt intruments (bonds) to borrow more money.
+Firms can issue bonds to raise more debts.
27. What are mortgages?
-A mortgage is a contractual agreement in which the borrower has to pay the lender fixed regular
payments consisting of interest and principal payments until the maturity date.
28. What equity markets?
-Equity markets are financial markets in which equity instruments (mostly common shares) are traded
29. What does the word “dividends” mean?
-Stockholders (cổ đông) are entitled to the firm’s net income and assets and receive periodic payments
called dividends
30. What is the maturity of equities?
-Equities have no maturity, so they are considered as long term instruments because shareholders can’t
get back their money from the equity issuers.
-If the investors want to get back their money, they can sell their shares to others in the equity markets.
31. What can equity holders receive from the equity issuer (company)?
-Shareholders can receive flexible dividends paid by the company. Primary and Secondary Markets are
classified based on the issurance of securities
32. What is government bond?
-A government bond is a debt security issued by a government to support government spending and
obligations.
33. What is corporate bond?
-A corporate bond is a type of debt security that is issued by a firm and sold to investors.
34. What is a primary market?
-A primary market is a financial market in which fresh securities are sold to initial buyers
-Role: The primary market helps issuers to raise more funds
35. Who are initial buyers of fresh securities?
-Initial buyers are investment banks who underwrite securities. (Initial buyers can be investment
banks, stock companies or insurance companies)
36. Who can be issuers?
-Issuers include corporations, governments and financial institutions.
37. How can investment banks (initial buyers) help the fresh securities issuers?
-They guarantee a price for a corporation's securities and then sell them to the public.
38. From what markets can issuers of securities raise more funds?
-Issuers of securities raise more funds through the primary markets, not from secondary markets.
39. Why primary markets for securities are not well know for the public? (characteristics)
-The primary markets for securities are not well known to the public because the selling of securities to
initial buyers often takes place behind closed doors.
40. What do investment banks do in primary markets?
-They assist in the initial sale of securities in the primary market by underwriting securities: They
guarantees a price for a corporation's securities and then sells them to the public.
41. What is a secondary market?
-A secondary market is a financial market in which previously issued securities are traded. (outstanding
securities)
42. Can issuers of securities raise more funds through the secondary market?
-Issuers of stocks and bonds can’t raise more money in secondary markets because in these markets
previously issued securities are traded.
43. What is the important role of secondary markets for the primary markets?
-Secondary markets increase the liquidity of financial instruments so that they make these instruments
more desirable and thus easier for the issuing firm to sell in the primary market.
-They determine the price of securities that the issuing firm sells in the primary market.
44. What is the important role of secondary markets for investors?
-Seconday markets help investors to sell their shares easily to other investors for cash.
45. What is the liquidity of financial instruments?
-The liquidity of financial instruments means their ability of being converted into cash.
46. What is an Exchange/ stocks exchanges?
-Exchange is an organized market in which transactions are made in a physical place and during fixed
hours
-Mostly securities of listed companies are traded.
-The operations of Exchanges are supervised by State Securities Commision
47. What is an OTC (Over the counter) market?
-An OTC market is a market in which transactions are made through means of communication such as
computer link or telephone and throughout the day. (An OTC market hasn’t got a physical place for
trading or fixed trading hours)
48. What IPO stands for?
49. Why are short-term debt instrument safer investments?
-Short-term debt instruments are safer investments because they are more liquid and they have smaller
fluctuations in prices.
50. What is a capital market?
-The capital market is the market in which longer-term debt instruments and equity instruments are
traded
51. What does a capital market include?
-A capital market includes long-term government bonds, long-term corporate bonds and stocks.
52. What is a money market?
-The money market is a financial market in which only short-term debt instruments are traded
53. What is the main disadvantage of owning a corporation’s equities rather than its debt?
-The main disadvantage of owning a corporation's equities rather than its debt is that an equity holder is
a residual claimant - that is, the corporation must pay all its debt holders before it pays its equity
holders.
54. What are Bonds?
-Bonds are the most common debt instrument. Bonds are created through a contract known as a bond
indenture. They are fixed-income securities that are contractually obligated to provide a series of
interest payments of a fixed amount and also repayment of the principal amount at maturity.
-Bonds appreciate in value when market interest rates decrease. It follows the logic that the present
value of a bond’s future cash flows is less when a greater discount rate is applied.
55. Why are primary markets are not well known to the public?
-Because the selling of securities to initial buyers often takes place behind closed doors./ or - Because
the information about selling of securities to initial buyers is confidential.
56. What is the significance of primary markets for the issuers of securities?
- Primary markets help issuers to raise new funds.
 57. What is the significance of secondary markets for the issuers of securities?
- Secondary markets are important to the issuers because: (1) prices of fresh securities are determined
in the secondary market; (2) these markets make it easier and quicker for the issuers to sell their fresh
securities in the primary markets.
58. What is the significance of secondary markets for the investors who invest their money in
securities?
- Secondary markets make securities more liquid, it means that investors can easily to sell their
securities in these markets to get back their money.