1.

MONEY AND BANKING

1. Money
1.1. Functions of money
- Standard of value/ measure of value/ unit of account [đo lường giá trị]: measure of
value is the first and necessary in goods exchange which people use the equal price
principles. Thus, to measure or identify the value of goods, people use money as a
unit of value likes kilogram for the weigh or meter for the height.
- Medium of exchange [Trung gian trao đổi]: derive from the convenient demand in
exchange. Money is the presence of value and it is easy to prefer and accept in
exchange.
- Store of value [bảo tồn và tích lũy giá trị]: this function occurs when income
outweigh consumption.
- Medium of payment [thanh toán]: money does the medium of payment, credit
relation is implemented by money, thus it is easier transaction than goods.
2. Financial Market
2.1. Financial Assets
Financial assets is a typical intangible assets. For example:
- Treasury bills [tín phiếu kho bạc]
- Corporate bonds [trái phiếu công ty]
- Government bonds [trái phiếu chính phủ]
- Common stocks [cổ phiếu thông thường]
- Preferred stocks [cổ phiếu ưu đãi]
- Saving books [sổ tiền gửi tiết kiệm]
- Options [hợp đồng quyền chọn]
2.2. Financial Market
* Definition: Financial Market is transaction market by financial assets such as
stocks, bonds or bills and so on.
* Purpose: - where the buyers meet the seller to decide price of financial assets.
- providing to investors deal with liquidity in case investors want to resell financial
assets.
- helping the buyers and sellers save time, information and research cost.
* Classification:
- Money market and capital market[thị trường tiền tệ và thị trường vốn]: money
market is the transaction of short-term capital, no more than 1 year while capital
market is the transaction of long-term capital, more than 1 year. The liquidity of the
former is quicker than the latter, but annual profit is smaller.
- Primary and secondary market [thị trường sơ cấp và thị trường thứ cấp]: primary
market is the publishing and transaction of initial stocks while secondary market is
transaction of published stocks.
- Organised market and OTC – over-the-counter [thị trường tập trung và phi tập
trung]: thị trường tập trung giao dịch chứng khoán đã niêm yết trong khi thị trường
phi tập trung giao dịch chứng khoán chưa niêm yết.
* Commodities on financial market:
- There are 3 common types on capital market: bonds is the long-term debt
certificates publishing by government or company to collect capital for operation;
mortgages [chứng khoán cầm cố BĐS] to sponsor for buying real estate; stocks is the
investment certificate and own a part of stock company.
- Money market includes treasury bill [tín phiếu kho bạc] which is issued by
Treasury to recover capital for budget shortage; certificate of deposit [chứng chỉ tiền
gửi]; commercial paper [tín phiếu công ty] short-term stocks of the most prestigious
companies; bank’s acceptance [thuận nhận của ngân hàng]; federal fund [dự trữ liên
bang]; repurchase agreement-repo [thỏa thuận mua lại]; Eurodollar deposit [tiền gửi
dollar ngoại biên].
3. Banking system
Medium Bank [Ngân hàng trung gian] includes Commercial Bank, Development and
Investment Bank, Special Bank [ngân hàng đặc biệt] and Social Bank [ngân hàng có
mục đích XH].
- Special Bank: Mutual Savings Banks [ngân hàng tiết kiệm tương hỗ], Savings and
Loan Associations [hiệp hội cho vay và phát triển], Export and Import Banks [ngân
hàng xuất nhập khẩu], Housing Banks [ngân hàng địa ốc].
3.1. Commercial Bank
* Definition: a commercial bank is a type of financial institution implementing all of
banking activities and other related businesses. Banking activities are money business
and banking services including receive deposits, offer credit and provide payment
services.
* How a commercial bank works:
The amount of money earned by a commercial bank is determined by the spread
between the interest it pays on deposits and the interest it earns on loans, which is
known as net interest income.
Customers find commercial bank investments, such as savings accounts and CDs,
attractive because they are insured by the Federal Deposit Insurance Corp (FDIC) and
money can be easily withdrawn. However, these investments traditionally pay very
low interest rates compared with mutual funds and other investment products. In
some cases, commercial bank deposits pay no interest, such as checking account
deposits.
*Example of how a commercial bank earns money:
When a commercial bank lends money to a customer, it charges an interest rate that is
higher than what the bank pays its depositors.
An example is that a customer purchases a five-year CD for $10,000 from a
commercial bank at an annual interest rate of 2%.
On the same day, another customer receives a five-year auto loan for $10,000 from
the bank at an annual interest rate of 5%.
Assuming simple interest, the bank pays the CD customer $1,000 over 5 years while
it collects $2,500 from auto loan customer. The $1,500 difference is net interest
income and it presents revenue for the bank.
3.2 Central Bank
* Definition: A central bank or monetary authority is a monopolized and often
nationalized institution given privileged control over the production and distribution
of money and credit. In modern economies, the central bank is usually responsible for
the formulation of monetary policy and the regulation of member banks.
The critical feature of a central bank — distinguishing it from other banks — is it
legal monopoly status, which gives it the privilege to issue bank notes and cash.
Privately owned commercial banks are only permitted to issue demand liabilities,
such as checking deposits.
*Functions:
Central bank’s duties usually fall into three areas:
First, central banks control and manipulate the money supply: issuing currency and
setting interest rates on loans and bonds. (Typically, central banks raise interest rates
to slow growth and avoid inflation; they lower them to spur growth, industrial
activity and consumer spending.) In this way, they manage monetary policy to guide
the economy and achieve economic goals, such as full employment.
Second, they regulate member banks through capital requirements, reserve
requirements (which dictate how much banks can loan to customers, and how much
capital they must keep on hand) and deposit guarantees, among other tools. They also
provide loans and services for a nation’s banks and its government, and manage
foreign exchange reserves.
Finally, a central bank also acts as an emergency lender to distressed commercial
banks and other institutions, and sometimes even a government. By purchasing
government debt obligations, for example, the central bank provides a politically
attractive alternative to taxation when a government needs to increase revenue.
*Monetary Policy: consists of the actions of a central bank, currency board or other
regulatory committee that determine the size and rate of growth of the money supply,
which in turn affects interest rates. Monetary policy is maintained through actions
such as modifying the interest rate, buying or selling government bonds, and
changing the amount of money banks are required to keep in the vault (bank
reserves).
Broadly, there are two types of monetary policy, expansionary and contractionary.
Expansionary monetary policy increases the money supply in order to lower
unemployment, boost private-sector borrowing and consumer spending, and stimulate
economic growth. Often referred to as “easy monetary policy,” this description
applies to many central banks since the 2008 financial crisis, as interest rates have
been low and in many cases near zero.

2. DEVELOPMENT ECONOMICS

1. Definition:
Development economics is a branch of economics that focuses on improving fiscal,
economic, and social conditions in developing countries. Development economics
considers factors such as health, education, working conditions, domestic and
international policies, and market condition with a focus on improving conditions in
the world’s poorest countries.
Economic Development includes Economic Growth, Structural Transformation and
Social Improvement.
* Economic Growth
Economic growth is the increase of income of an economy in a certain time (usually
in a year). The increase is showed by scale and speed through GNI and GDP
indicators.
* Economic Development
Economic Development is the progress of all aspects of an economy and solid
combination of economic and social transformation in a country.
2. Structural Transformation
Large scale transfer of resources from some sectors to others in a system, necessitated
by fundamental changes in its policies or objectives.
3. Social Improvement
The final purpose of economic development is not growth or transformation, it is
exactly elimination of poverty and lack of nutrition, last-long average age, approach
of medicine, clean water, intellectual level,…
4. Sustainable Development
The process of solid, proper combination of three aspects includes economic growth,
social improvement and environmental protection. To measure, they use some
indicators such as stable economic growth, progress and social justice, saving natural
resources, living environment enhancement.

3. INTERNATIONAL ECONOMIC RELATIONS

1. Definition: International Economic Relations is the total economic relations
established between world economic subjects in the movement of factors and
instruments of open-reproduction.
- Economic subjects: 210 countries and territories, individuals (participate in labor
movements, international trade), multinational companies (Apple, Microsoft,
Toyota), non-governmental organnisations (Oxfam, Care,…), international
organisations (IMF, WB, UNDP,…).
- Distinction IERs vs External Economics:
IERs External Economics
- Total economic interactions of - In terms of economic, trade, science
economies around the world and technology relations of a country
- Containing a lot of relations and with external economic subjects.
external economic activities of
different economies over the world.
- IERs includes International Trade, Co-operation in Science, Technology and
Environment, International Labor Relation, International Finance and Money.
2. International Trade
2.1. Definition: is the exchange of capital, goods, and services across international
borders or territories. This network relates to tariff policies and customs procedures,
quality measurement system, transportation insurance and other regulations.
2.2. International trade theories
- Adam Smith's model – Absolute Advantage.(Wealth of Nation - 1776)
* Capability of one country to produce more volume of a product type with the same
amount of input than other countries.
* Produce only goods that you’re most efficient; and then trade for those you’re not
efficient. -> International trade brings benefit to both countries.
* Absolute Advantage is not able to explain why the developing countries which
don’t have the absolute advantage compared with developed countries still involve in
international trade.
- Ricardian model – Comparative Advantage. (Principles of Political Economy -
1817)
* In economics, comparative advantage refers to the ability of a party (country) to
produce a particular good or service at a lower marginal and opportunity cost over
another.
* A nation will focus on produce the goods that it has the most comparative
advantage, and trade for other goods from other countries regardless of that for those
goods it has the absolute advantage compared with other countries.
- Hecksher-Ohlin model (H-O model)
The Heckscher-Ohlin model explains mathematically how a country should operate
and trade when resources are imbalanced throughout the world. It pinpoints a
preferred balance between two countries, each with its resources.

The model isn't limited to tradable commodities. It also incorporates other production

factors such as labor. The costs of labor vary from one nation to another, so countries
with cheap labor forces should focus primarily on producing labor-intensive goods,
according to the model.

- Mercantilism /ˈmɜː.kən.tɪ.lɪ.zəm/ [Lý thuyết trọng thương]

Mercantilism is an economic theory and practise where the government seeks to
regulate the economy and trade in order to promote domestic industry – often at the
expense of other countries. Mercantilism is associated with policies which restrict
imports, increase stocks of gold and protects domestic industries. Trade becomes a
zero-sum game (winner and looser).
2.3. International Trade Policies
- Free trade [Chính sách thương mại tự do], also called laissez-faire, a policy by
which a government does not discriminate against imports or interfere
with exports by applying tariffs (to imports) or subsidies (to exports). A free-trade
policy does not necessarily imply, however, that a country abandons all control
and taxation of imports and exports.
- Protectionism [Chính sách thương mại bảo hộ]: is the economic policy of
restraining trade between countries through methods such as tariff on imported
goods, restrictive quotas and a variety of other government regulations to protect
domestic industries.
2.4. Regulations in International Trade
- Most Favoured Nation [Tối huệ quốc]: refers to the equal treatment, in which a
country commits giving no less favourable treatment to a foreign partner than the
treatment given to any third country.
- National Treatment [Đãi ngộ quốc gia]: refers to a country commits giving the
equal treatment to imported goods from a foreign country in the former’s market
similarly to domestic products.
- Open market: all countries discuss to reduce tariff and other trade barriers such as
technology, standards and quantities,... besides, they also commits not increasing the
tariff level that reduced.
- Transparency: all countries need ensure the transparent law and polices.
2.5. Instruments of International Trade Policies
- Tariffs [thuế quan]: tariffs (or taxes) are imposed on imported goods. Tariff rates
usually vary according to the type of goods imported. Import tariffs will increase the
cost to importers, and increase the price of imported goods in the local markets, thus
lowering the quantity of goods imported, to favour local producers.

- Non-tariff [phi thuế quan]: A non-tariff barrier is a way to restrict trade using
trade barriers in a form other than a tariff. Nontariff barriers include quotas,
embargoes, sanctions, and levies. As part of their political or economic strategy, large
developed countries frequently use nontariff barriers to control the amount of trade
they conduct with other countries.

- Quotas [hạn ngạch]: to reduce the quantity of a particular good that the country
imports for specific period. In theory, quotas boost domestic production by restricting
foreign competition.

- Administrative barriers [rào cản hành chính]: Countries are sometimes accused
of using their various administrative rules (e.g. regarding food safety, environmental
standards, electrical safety, etc.) as a way to introduce barriers to imports.

- Anti-dumping legislation [luật chống bán phá giá]: is a protectionist tariff that
domestic government imposes on foreign goods that it believes these goods are
priced low fair market value. Dumping is a process where a company exports a
product at a price lower than the price it normally charges in its own home market.

- Direct subsidies [trợ cấp trực tiếp]: Government subsidies (in the form of lump-
sum payments [khoản thanh toán gộp] or cheap loans[khoản vay lãi suất thấp]) are
sometimes given to local firms that cannot compete well against imports. These
subsidies are purported to "protect" local jobs, and to help local firms adjust to the
world markets.

- Export subsidies [trợ cấp xuất khẩu]: Export subsidies are often used by
governments to increase exports. Export subsidies increase the amount of trade, and
in a country with floating exchange rates [tỉ giá ngoại tệ thả nổi – không can thiệp của
nhà nước], have effects similar to import subsidies.

- Exchange rate manipulation [thao túng tỉ giá ngoại tệ]: A government may
intervene in the foreign exchange market to lower the value of its currency by selling
its currency in the foreign exchange market. [đặt giá nội tệ ở mức thấp] Doing so will
raise the cost of imports [tăng giá nhập khẩu] and lower the cost of exports [giảm giá
xuất khẩu], leading to an improvement in its trade balance [thay đổi cán cân thương
mại]. However, such a policy is only effective in the short run, as it will most likely
lead to inflation in the country, which will in turn raise the cost of exports, and reduce
the relative price of imports. [chính sách này chỉ có tác dụng ngắn hạn; dài hạn sẽ dẫn
đến lạm phát tăng -> tăng giá xuất khẩu -> giảm giá nhập khẩu]

2.6. International trade bloc [khối thương mại quốc tế]: is a type of
intergovernmental agreement, often part of a regional intergovernmental
organization, where regional barriers to trade, (tariffs and non-tariff barriers) are
reduced or eliminated among the participating states.
- FTA-Free Trade Area [Khu vực mậu dịch tự do]: is the lowest level of economic
integration. In this stage, members eliminate tariff barriers, quantitative limitation,
non-tariff barriers within internal trade bloc. However, they still have independent
tariff policies to external countries.
- Custom Union [Liên minh thuế quan]: is the next stage. Besides eliminating tariff
barriers, all members have to apply a common tariff policy to external countries.
- Common Market [Thị trường chung]: is the tariff union model which plus
eliminating some limitation related to capital and labor movement.
- Economic Union [Liên minh kinh tế]: is the high-level integration based on
common market model. In addition, it also contains economic policy co-ordination
between members countries such as fixed exchange rate, suitable interest rate and
unique body controlling common currency.
- Comprehensive Union [Liên minh toàn diện]: is the last stage of integration. All
members be consistent in political and economic areas including finance, currency,
tax and social policies. They discuss together about common economic policy,
common external policy, common currency, common bank and common external
financial policy.
3. International investment [đầu tư quốc tế]: FDI, PFI & ODA.

3.1. FDI – Foreign Direct Investment [Đầu tư trực tiếp nước ngoài]
- Definition: A Foreign Direct Investment (FDI) is an investment involving a long-
term relationship and reflecting a lasting interest and control by a resident entity in
one country (foreign direct investor or parent enterprise) in an enterprise resident in
another economy (FDI enterprise, affiliate enterprise or foreign affiliate).

- Types of FDI: FDI comes in three types

(1) Horizontal FDI /ˌhɒrɪˈzɒntəl/ the company does all the same activities abroad as
at home. For example, Toyota assembles motor cars in Japan and the U.K.
(2) Vertical FDI different types of activities are carried out abroad. In case of
forward vertical FDI, the FDI brings the company nearer to a market (Toyota
buying a car distributorship in America). In case of backward vertical FDI, the
international integration goes back towards raw materials (Toyota getting majority
stake in a type manufacturer or a rubber plantation).
(3) Conglomerate /kənˈɡlɒm.ər.ət/ , the investment is made to acquire an unrelated
business abroad. It is the most surprising form of FDI, as it requires overcoming two
barriers simultaneously – one, entering a foreign country and two, working in a new
industry.

- Methods:
(1) by incorporating a wholly owned subsidiary or company anywhere
(2) by acquiring shares in an associated enterprise
(3) through a merger or an acquisition of an unrelated enterprise
(4) participating in an equity joint venture with another investor or enterprise.

- The importance of FDI

FDI is an important source of externally derived finance that offers countries with
limited amounts of capital get finance beyond national borders from wealthier
countries. For example, exports and FDI are the two key ingredients in China's rapid
economic growth.
According to the World Bank, FDI is one of the critical elements in developing the
private sector in lower-income economies and thereby, in reducing poverty.
3.2. FPI – Foreign Portfolio Investment [Đầu tư gián tiếp nước ngoài]
- Definition: Foreign portfolio investment (FPI) consists of securities and other
financial assets passively held by foreign investors. It does not provide
the investor with direct ownership of financial assets and is relatively liquid
depending on the volatility of the market. 

Foreign portfolio investment differs from foreign direct investment (FDI), in which a

domestic company runs a foreign firm, because although FDI allows a company to
maintain better control over the firm held abroad, it may face more difficulty selling
the firm at a premium price in the future.

3.3. ODA – Official Development Assistance [Viện trợ phát triển chính thức]
- Definition: Official development assistance is financial flow of official agencies
such as governmental organisations, multi-governmental or multinational
organisations, non-governmental organisations providing to least and developing
countries to promote their economic growth and welfare.

- According to Development Assistance Committee (DAC), ODA needs to

contain 2 elements:
(1) designed to promote economic development and social welfare as the main
purpose (exclude military assistance and non-development purposes).
(2) provided as a grant [một khoản trợ cấp] or a subsidized [cho vay có trợ cấp]. In
which, a loan is considered as a grant if its grant element is at least 25% [một khoản
vay được xem là viện trợ nếu có tỷ lệ cho không lớn hơn hoặc bằng 25%].

- Types of ODA:
(1) Nature [theo tính chất]: non-refundable aid, refundable aid and mixed aid [vừa
cho không, vừa cho vay]
(2) Purpose [theo mục đích]: investment for development, technical aid, payment
balance aid, humanity and rescue aid, military aid
(3) Conditions [theo điều kiện]: non-constraint, constraint and a portion of constraint.

* Advantages of ODA:
- Low interest rate (less than 2%)
- Long payment period.
- Having a grant element of at least 25 percent.
* Disadvantages of ODA:
- Eliminate the protectionism; preference for investors.
- Require to buy products from nations that assist.
- Changes of exchange rate will increase the value of ODA need to be returned.

3.4. Public debt, External debt [Nợ công, Nợ nước ngoài]

- Public Debt: is how much a government owes to local or foreign lenders
(individuals, businesses and other governments). For example, if the Government
runs a budget deficit, it has to borrow money, which can be done by selling
Government bonds (sort of like shares of the government- a financial security) or by
borrowing money from the Federal Reserve (which is basically printing money).

- External Debt: is the debt owed by bodies in one country to bodies in another
(individuals, businesses and other governments). For example, Costco might borrow
money from an overseas lender (because better interest rates, which is unlikely given
low interest rates in the US at the moment, but please just go with it), and they incur a
debt. A lot of firms will do this to invest, and improve efficiencies or to expand.

Pros: Debt can improve the standard of living in a country by allowing the
government to build new roads, improve education and job training and provide
pensions. Over time, these benefits more than pay for the interest accrued. Budget
deficits are critical to help make up for lower investment and private spending during
an economic recession.

Cons: Too much government borrowing can cause economic problems by driving
interest rates up and causing inflation. It is also unwise to run a large deficit to
finance spending that is unlikely to cause higher future economic growth. When the
national debt-to-GDP ratio reaches a critical level, investors generally begin to
demand higher interest rates due to the higher risk, causing more income to go toward
repaying the debt and less toward growth and government services.

4. International Finance
4.1. Definition: International finance – sometimes known as international
macroeconomics – is a section of financial economics that deals with the monetary
interactions that occur between two or more countries. This section is concerned with
topics that include foreign direct investment and currency exchange rates.
4.2. Foreign Exchange Marke
Definition: is the market in which participants are able to buy, sell, exchange and
speculate (đầu cơ) on currencies.
Participated by: banks, commercial companies, central banks, investment
management firms, hedge funds, and retail forex brokers and investor (85% )
Exchange rate: the rate at which one currency will be exchanged for another
Exchange rate Quotation: In a direct quotation, the foreign currency is the base
currency ( đồng yết giá) and the domestic currency is the counter currency ( đồng
định giá). In an indirect quotation, the domestic currency is the base currency and the
foreign currency is the counter currency.

4.3. Balance of payment (BOP)

Definition: A record of all transactions made between one particular country and all
other countries during a specified time period.
BOP = Current Acc + Capital Acc + Financial Acc + Net errors and Omissions
Current Acc: merchandise export and imports, earnings and expenditures for visible
trade.
Capital Acc: capital tranfers and the acquisition or disposal of nonproduced,
nonfinancial assets.
Financial Acc: FDI, FPI, other investments (loans, trade credit, currency and
deposits).
BOP: Debit < Credit  surplus. Debit > Credit  Deficit
How to reduce a trade deficit: tight monetary and fiscal policy (↓inflation and income
 ↑export + ↓imports), devalue the currency ( ↑export + ↓imports), establish
public control (Trade controls: exports and imports are manipulated through tariff,
quotas and subsidies).

4.4. Theory of Optimum Currency Area (OCA) [Thuyết Khu vực tiền tệ tối ưu]
Definition: Optimum currency area theory (OCA) states that specific areas which are
not bounded by national borders would benefit from a common currency.
Optimum currency area theory can benefit a region by significantly increasing trade.
However, this trade must outweigh the costs of giving up a national currency as an
instrument to adjust monetary policy. Areas using OCA theory will still maintain a
flexible exchange rate system with the rest of the world.
4.5. Theory of Purchasing Power Parity (PPP) [Thuyết sức mua tương đương]
Definition: Purchasing power parity (PPP) compares different countries' currencies
through a "basket of goods" approach.
Purchasing power parity is based on an economic theory that states the prices of
goods and services should equalize between countries over time.
PPP Calculation:
The purchasing power parity calculation tells you how much things would cost if all
countries used the U.S. dollar. In other words, it describes what anything bought
throughout the world would cost if it were sold in the United States. The total of all
those goods and services equals the country's economic output. Add the number
produced in a year and you get the country's gross domestic product as measured by
PPP.
Example: China produced 127 trillion yuan's worth of goods and services in 2017.
Using an exchange rate of 6.37 yuan per dollar, that's $11.97 trillion. The United
States produced $19.36 trillion. But most of that difference is because the cost of
living in China is much lower than in the United States. Since this method depends
on exchange rates, China's GDP will change when its exchange rate changes.
4.6. Interest Rate Parity (IRP) [Ngang giá lãi suất]
Definition: Interest rate parity (IRP) is a theory in which the interest rate
differentialbetween two countries is equal to the differential between the forward
exchange rate and the spot exchange rate.
[Lý thuyết ngang giá lãi suất (IRP): sự khác biệt lãi suất giữa hai quốc gia thì cân
bằng với sự khác biệt giữa tỷ giá giao ngay với tỷ giá kỳ hạn.]
Formula:
1+ic
F0 = S0 1+ ib
Where: F0 is the forward rate
S0 is the spot rate
ic is the rate in country c
ib is the rate in country b
Example:
-Principle: Borrow in lower interest rate and invest in higher interest rate
A Vietnamese wants to deposit $1000 in a year.
Interest rate in the U.S.: I (USD) = 2%/year
Interest rate in Vietnam: i (VND) = 6%/year
The spot rate: S(USD/VND) = 20,828 VND
The forward rate: F(USD/VND) = 21,500 VND
a.What is the currency that he should deposit?
b. If he has no money, what will the currency be that he should borrow? And how
does he do to take benefit?

KEY:
a. USD: After 1 year, he can collect: V1= V(1+iusd) = 1000 (1+2%) = 1020 USD
F 20,828
VND: After 1 year, he can collect: V2 = S (1+ivnd) V= 21,500 (1+6%) 1000 = 1026
USD
Thus, he should deposit by VND
20,828
b. (1+6%) > 21,500 (1+2%) => CIA hướng nội, vay ngoại tệ đầu tư nội tệ

4.7. International Fisher Effect (IFE) [Hiệu ứng Fisher]

Definition: The International Fisher Effect (IFE) is an economic theory stating that
the expected disparity between the exchange rate of two currencies is approximately
equal to their countries' nominal interest rates. 
Calculating the IFE:
i1−i 2
E= 1+i2
≈ i1−i2

Where: E represents the % change in the exchange rate

i1 represents country A's interest rate

i2represents country B's interest rate

Example:

If country A's interest rate is 10% and country B's interest rate is 5%, country B's
currency should appreciate roughly 5% compared to country A's currency. The
rationale for the IFE is that a country with a higher interest rate will also tend to have
a higher inflation rate. This increased amount of inflation should cause the currency
in the country with the high interest rate to depreciate against a country with lower
interest rates.

5. International Economic Integration [Hội nhập Kinh tế quốc tế]

5.1. Definition: Economic integration is an arrangement between different regions
that often includes the reduction or elimination of trade barriers, and the coordination
of monetary and fiscal policies. Economic integration aims to reduce costs for both
consumers and producers and to increase trade between the countries involved in the
agreement.
5.2. Integration levels: Britain Economist, Balassa divided into 5 levels from low to
high as follows
- FTA-Free Trade Area [Khu vực mậu dịch tự do]: is the lowest level of economic
integration. In this stage, members eliminate tariff barriers, quantitative limitation,
non-tariff barriers within internal trade bloc. However, they still have independent
tariff policies to external countries.
- Custom Union [Liên minh thuế quan]: is the next stage. Besides eliminating tariff
barriers, all members have to apply a common tariff policy to external countries.
- Common Market [Thị trường chung]: is the tariff union model which plus
eliminating some limitation related to capital and labor movement.
- Economic Union [Liên minh kinh tế]: is the high-level integration based on
common market model. In addition, it also contains economic policy co-ordination
between members countries such as fixed exchange rate, suitable interest rate and
unique body controlling common currency.
- Comprehensive Union [Liên minh toàn diện]: is the last stage of integration. All
members be consistent in political and economic areas including finance, currency,
tax and social policies. They discuss together about common economic policy,
common external policy, common currency, common bank and common external
financial policy.
5.3. Effects of economic Integration
a. Positive points:
- Increasing expenditure of goods and services and the approach of diversified goods
and services with competitive prices.
- Increasing the attraction of foreign capital likes ODA, FDI,…
- Promoting structural transformation and investment in specialized production.
- Promoting innovation process and institutional improvement
- Creating proper legal framework
b. Negative points:
- cutthroat competition [cạnh tranh gay gắt] => bankrupt and unemployment increase.
- Reduction in state budget because of eliminating tariff barriers.
- Reduction in planning independent policies
- Eroding moral value and traditional culture.
 4. HISTORY OF ECONOMIC THEORIES
1. Definition: History of economic theories is a social scientific subject that research
of process, development, fight and replacement of economic thoughts during many
periods of time.
- Studied objects: the system of economic stands [quan điểm kinh tế] of different
schools in certain periods of time.
- Methodology: analysis in economic history is undertaken using a combination of
historical, statistical methods and applying economic theories to historical situation.
2. Schools of economic thoughts [trường phái tư tưởng kinh tế]
2.1. Ancient and Middle Ages Economic Thought [Tư tưởng kinh tế cổ đại và
trung cổ]
- Ancient thought considered slave possession [chiếm hữu nô lệ] is suitable,
appreciated natural economy. Some well-known authors of this thought came from
Greek, Roman Empire and China.
- Middle Ages thought was known as a feudalism /ˈfjuːdəlɪzəm/ [chế độ phong kiến]
which protected natural economy through the law impacted by theological thought
[những tư tưởng thần học].
2.2. Mercantilism /mɜːˈkæntɪlɪzəm/ [chủ nghĩa trọng thương]
- Mercantilists believed that money (gold) is the basis and actual assets of a country.
Therefore, the economic purpose of each country is increasing money as much as
possible.
- The country getting more money was more prosperous. Goods were only the mean
to increase the amount of money.
- To increase the amount of money, the country had to promote international trade to
create trade surplus, maximize export and minimize import.
- It was the zero-sum game (winner and looser).
- They strongly appreciated state’s economic policies and the government was the
main factor to develop economy.
2.3. Physiocrat /’fɪzɪokræt/ [chủ nghĩa trọng nông] in Fance 18th century
- People believed that human society developed as nature law. They confirmed that
the unique resource of prosperities is nature and agriculture.
2.4. Classical political economy in Britain [Kinh tế chính trị học cổ điển Anh]
(1) Adam Smith (1723-1790)
- A. Smith with “Invisible Hand” [bàn tay vô hình]: is a concept that even without
any observable intervention – free market will determine an equilibrium in the supply
and demand for goods. He appreciated the natural law and invisible hand. Production
activities, circulation and circulation of goods were developed based on invisible
hand. The government shouldn’t interfere in economy, economic activities has
privacy circle.
- Absolute advantage refers to the ability of a party (country) to produce more of a
product or service than competitors, using the same amount of input. A. Smith firstly
described the principle of absolute advantage in the context of international trade,
using labor as the unique input.
(2) David Ricardo (1772-1823)
- Comparative advantage opened a new analysis between an economy and external
countries. This thought refers to the ability of a country to produce a particular good
or service at a lower marginal and opportunity cost over other countries.
2.5. Political Economy Marxist-Leninist [Kinh tế chính trị học Mác – Lenin]
(1) Marxist
- Marx’s Doctrine was drawn from the most advanced theories of English Political
Economy, German Philosophy and French Socialism [Kinh tế chính trị Anh, Triết
học cổ điển Đức và Chủ nghĩa xã hội không tưởng Pháp].
- Marx pointed out the internal conflict of capitalism and historical mission of
industrial workers that through revolutionary to transform capitalism into
communism.
- The doctrine also revealed the fundamental secret of capitalism, surplus value which
can be defined basically as all the wealth that the workers create but do not yet.
(2) Leninist
- In the context of free competition turning to monopoly of capitalism, Lenin
continued protecting and developing Marx’s doctrine. He pointed out some
fundamental features of monopoly capitalism and the change from monopoly
capitalism to state’s monopoly capitalism.
- In the transitional period of communism, he made plan to build communism based
on 3 purposes: nationalism [quốc hữu hóa] and co-operation [hợp tác hóa],
industrialism [công nghiệp hóa] and culture revolution [cách mạng văn hóa].
2.6. Neoclassical Economics [trường phái tân cổ điển]
- In general, major thoughts of neoclassical economics continued to support free
market which was adjusted by the law of demand – supply and oppose the
government intervention. They focused on microeconomics and scarcity theory [quy
luật khan hiếm]. Thus, limitation thoughts played dominated role to all economic
concepts, categories and theories such as “profit constraint”, “value constraint”,
“productivity constraint”,… These thoughts were considers as the foundation of
modern microeconomics.
2.7. Keynesian Economics [trường phái Kinh tế học Keynes]
- Keynesian Economics represented a new way of looking at spending, output and
inflation. Keynesian Economics was developed during 1930s in an attempt to
understand the Great Depression. He advocated for increasing government
expenditure, lower taxes to stimulate demand and pull the global economy out of
depression.
- Subsequently, Keynesian Economics referred to the central role of the government
through intervention and adjustment to achieve optimal economic performance.
Government’s policies aimed to increase demand which influenced on common
society physiology: consumption tendency, saving tendency, cash preference
tendency and fight against crisis and unemployment as well.
2.8. Neo-Liberalism [chủ nghĩa tự do mới]
- Neo-Liberalism referred to a new system of capitalism economy which was the
combination of free market and government intervention at certain level. Following
this, the government did not limit market development and it had to make market
operate normally to protect free competition.
2.9. Modern Schools [trường phái chính hiện đại]
- This thought was based on both “invisible and visible hand” in the intervention of
economic operation. Thus, it was the combination of Neoclassical and Keynesian
Economics.
- In mixed economy [nền kinh tế hỗn hợp], the thought focused on 2 hands which
were market mechanism [cơ chế thị trường] and government intervention. More
specific, marker mechanism determines the price and quantity of products
meanwhile, the government supports the market through taxes, spending and
regulations.

5. MICROECONOMICS
1. PRICE MECHANISM
Definition: Microeconomics is a branch of economics that studies the behavior of
individuals and small impacting organizations in making decisions on the allocation
of limited resources.
- Microeconomics examines how these decisions and behaviors affect the supply and
demand for goods and services, which determine prices, and how prices, in turn,
determine the quantity supplied and quantity demanded of goods and services [cung
cầu và giá cả là tác động qua lại].
1.1. Demand
- Quantity demanded is the amount of good or service that the buyers are willing to
and able to purchase.
- Demand is the full description of how the quantity demanded changes as the price
of good changes.
- Law of demand: states that the quantity demanded of a good falls when its price
rises, and vice versa, the quantity increases when the price decreases, provided all
other factors that affect buyer’s decision are unchanged (Ceteris Paribus).
- Determinants of demand:
D= f (P, Pr, Y, T, E, U)
where: P: Price of a good
Pr: Price of relative goods
Y: Income of consumers
T: Taste of consumers
E: Expectation
U: other factors: size of population,…
- Consumer surplus [thặng dư tiêu dùng] is the buyers’ willingness to pay for a good
minus the amount that they actually pay for it. It measures the Utility [độ thỏa dụng].
(Pic 1: the area below the Demand curve and above the price)

Pic 1. Consumer surplus Pic 2. Producer surplus

1.2. Supply
- Quantity supplied is the amount of a good or service that sellers are willing and
able to sell.
- Supply is full description of how the quantity supplied of a good responds to
changes in its price.
- Law of demand states that the quantity of supplied of a good rises when the price
of the good rises and vice versa, as long as providing all factors that affect to the
suppliers’ decision are unchanged.
- Determinants of supply:

S = f (P, Pi, N, T, E, U)
where: P: Price of the good
Pi: Price of input
N: Number of producers
T: Technology
E: Expectation
U: Other factors
- Producer surplus [thặng dư sản xuất] is the amount of a seller selling a good
minus the seller’s cost. It measures the benefit of sellers participating in the market.
(Pic 2. The area below the price and above the supply curve).
1.3. Equilibrium /iːkwiˈlibriəm/
- The price will automatically reach a level at which the quantity demanded equals
the quantity supplied.
1.4. Elasticity /iːlӕˈstisəti/ [tính co dãn]
- Elasticity is the measurement of how sensitive of an economic variable changed in
another variable. This figure shows that changeable percentage of a variable when the
relative variable changed 1%.
% change∈Quantity Demanded
- Price Elasticity of Demand (PEoD) = % change∈ Price

[chỉ tiêu này cho biết sự nhạy cảm của lượng hàng được yêu cầu đối với những thay
đổi của giá cả. Nó cho biết tỷ lệ % thay đổi lượng cầu đối với một mặt hàng sau khi
giá của nó tăng 1%]. PEoD is absolute value [GT tuyệt đối].
 PEoD > 1 => Demand is Price Elasticity [rất nhạy cảm về giá]
 PEoD = 1 => Demand is Unit Elasticity [co dãn đơn vị]
 0 < PEoD < 1 => Demand is Price Inelasticity [ko co dãn tương đối]
 PEoD = 0 => Demand is totally Inelasticity [hoàn toàn ko co dãn]
 PEoD = ∞ => Cầu co dãn vô hạn
Example: in 1973-974, crude oil shock, OPEC limited oil supply, price increased 4
times compared to equilibrium price. Because oil demand was inelasticity (-0,1) and
it was so hard to alter oil by other resource in running car, plane,… Thus, revenue of
OPEC increased sharply in short-term.
2. THEORY OF CONSUMER CHOICE
2.1. Utility /juˈtiləti/ [Lợi ích]
- Utility is the power of a good or service to satisfy a human desire.
- Total Utility (TU) is the sum of all the utilities derived /dɪˈraɪvd/ from the total
number of units consumed.
- Marginal Utility (MU) is the utility derived from additional unit of a good
consumed.
2.2. The Law of Diminishing Marginal Utility [Quy luật lợi ích cận biên giảm dần]
- With successive increase in consumption of a commodity, the M.U of the
commodity will fall. The T.U will continue to rise till the point that the M.U comes
zero.
2.3. The Budget Constraint /kənˈstreɪnt/ [Đường Ngân sách]
- The Budget shows the various combination (“bundles” /ˈbʌn.dəl/  ) of goods that
the consumer can afford given his income and the price of goods.
2.4. Indifferent Curve [Đường bàng quan]
- An Indifferent Curve shows consumption bundles that give the consumer the same
level of satisfaction.

=> The point is the intersection of Budget

Constraint and the Indifferent Curve that is optimal choice.
3. THEORY OF PRODUCTION
3.1. Definition
- Production cost refers to the costs incurred by a business when manufacturing a
good or providing a service. Production cost includes a variety of expenses such as
labour, raw materials, capital, land,… Technology can be viewed either as a form of
fixed capital or circulating capital.
- Explicit cost [chi phí tính toán]: is a cost that is easily identified, and is accounted
for in business documents or financial statements. Example of explicit cost would be
items such as wage expense, rent or lease costs. It is easy to identify the sources of
those cash out flows and the business activities to which the expenses are attributed.
- Opportunity cost [chi phí cơ hội]: represents the benefits that an individual,
investor or business misses out on when choosing one alternative over another.
3.2. Short-term cost
- Fixed cost (FC) [chi phí cố định]: is a cost that does not change if the quantity of
products changes.
- Variable cost (VC) [chi phí biến đổi]: is a cost that change if the quantity of
products changes.
- Total cost (TC) in short-term: TC = FC + VC = f(Q)
- Average Fixed Cost (AFC) [chi phí cố định bình quân]: is the fixed cost of a unit
FC
of a commodity. AFC = Q , là đường hypecbol.
AFC decreases when business increases the amount of commodity.
- Average Variable Cost (AVC) [chi phí biến đổi bình quân]: is the variable cost of
VC
a unit of a commodity. AVC = Q , là đường parabol.
First, AVC decreases when Q increases, then AVC increases when Q increases.
- Average Total Cost (ATC) [tổng chi phí bình quân] = AFC + AVC
- Marginal Cost (MC) [chi phí cận biên]: is the additional cost when producing
more a unit of a commodity.
3.3. Profit [Lợi nhuận]
- Profit is the between total revenue and total cost: ∏ = (P –ATC) x Q
- Marginal Revenue (MR) [Doanh thu cận biên]: is the increase in revenue that
results from the sale of an additional unit of output.

=> A business optimizing profit needs to increase the quantity of products until MR
over MC and stop at MC over MR. The optimized point where MR equals MC.

3.4. Marginal Productivity (MP) [Năng suất cận biên]

- Marginal Productivity of an input is the extra-output that can be produced by
using more unit of the input, assuming that the quantities of other input are not
changed.
- The Law of Diminishing Marginal Productivity [Quy luật Năng suất cận biên
giảm dần] states that any advantage gained from slight improvement on the input side
of the equation will only advance to a point. After that, additional input will not
increase productivity.
3.5. Isoquant [Đường đồng sản lượng]
- Isoquant Curve is a contoured line that is drawn through points that produce the
same quantity of output while quantities of inputs (usually two or more) are
unchanged. The mapping of the isoquant curve addresses cost minimization issues for
producers.
- The Indifferent Curve, on the other hand, helps to map out the utility
maximization issues that customers face.
4. TYPES OF MARKETS
4.1. Perfect Competitive Market [thị trường cạnh tranh hoàn hảo]
- Perfect competitive market describes market that no participants are enough ability
to set price of a product.
- A firm in perfect market is Price Taker (who cannot stay in business if its price is
higher than others; unable raise market price by reducing production and attempting
to create a shortage; does not want to charge a price lower than others) and has a
negligible /ˈneɡ.lɪ.dʒə.bəl/ impact on market price.
- A firm shuts down if total revenue is less than variable cost, no matter Q produced.
(TR < VC, P < AVC).

4.2. Monopoly [Độc quyền]

- A monopoly is a firm that is sole seller in its market [người bán duy nhất], faces a
downward sloping demand curve, is a price maker, reduce price to increase sales.
- Price maker can respond to the inefficiencies of monopoly behaviour with antitrust
law [luật chống độc quyền], regulation of prices or by turning the monopoly into a
government-run enterprise.
- Monopolists can raise their profits by charging different prices to different buyers
based on consumers’ willing to pay. Eg: movie tickets, airline tickets,...
- Natural monopoly: an industry is a natural monopoly when a single firm can supply
a good or service to an entire market at a smaller cost than could two or more firms.
4.3. Oligopoly [Độc quyền nhóm] /ˌɒl.ɪˈɡɒp.əl.i/ 
- Oligopoly market has fewer sellers offering similar or identical products and
interdependent firms.
- Oligopoly maximizes total profits by forming a cartel /kɑːˈtel/ [tập đoàn] and acting
like a monopolist.
- Game Theory and the economics of Co-operation: Game Theory is the study of
how people behave in strategic situations. Strategic decisions are those in which each
person, in deciding what action to take, must consider how others might respond to
that action. Each firm knows that its profit depend on not only how much it produces,
but also how much other firms produce.
- The Prisoners’ Dilemma: provides insight into the difficulty in maintaining co-
operation even when co-operation would make the better off. Co-operation is difficult
to maintain because it is not the best interest of individual player.
4.4. Monopolistic Competition [cạnh tranh độc quyền]
- A monopolistic competitive market is characterized by three attributions: many
firms, differential products and free entry.
- The equilibrium in a monopolistic competition differ from perfect competition in
which each firm has excess capacity and charges a price above marginal cost.
- The product differentiation inherent in monopolistic competition leads to the use of
brand names and advertising.
+ Critics argue that using brand names and advertising, firms take advantage of
consumer irrationality /ɪˌræʃ.ənˈæl.ə.ti/ and reduce competition.
+ Defenders support that firms use these to inform consumers and to compete more
significantly on price and product quality.

6. MACROECONOMICS
Definition: Macroeconomics is a branch of the economics that studies how aggregate
economy behaves. In macroeconomics, a variety of economy-wide phenomena is
researched such as rate of growth, inflation, price levels, gross domestic product
(GDP) and unemployment rate. The government uses these factors and models to
help develop its economy policies to achieve an efficient economic operation.
1. BASIC ECONOMIC INDICATORS
1.1. Gross National Product – GNP [Tổng sản phẩm quốc dân]
- GNP is an estimation of total value of all the final products and services turned out
in a given period by the means of production owned by a country’s residents.
- Therefore, any output produced by foreign residents within the country’s border
must be excluded in calculation of GNP while any output produced by the country’s
residents outside of its borders must be counted.
- GNP does not include intermediate goods and services to avoid double-counting
since they are already incorporated in the value of final products and services.
- Nominal GNP (GNPn) estimates total final products by current prices.
- Real GNP (GNPr) measures total products by fixed prices.
=> The GNPr takes GNPn measured in current prices and adjusts for any changes in
price level for goods and services included in the calculation of GNP.
- GNI is also similar to Gross National Product (GNP). But GNP is calculated based
on output rather than income. In practice there are slight discrepancies in
measurement between the two, and GNI has come to be preferred to GNP by
organizations such as the World Bank. 
1.2. Gross Domestic Product – GDP [Tổng sản phẩm quốc nội]
- GDP is the monetary value of all the final goods and services produced within a
country’s borders in a specific time period.
- Nominal GDP (GDPn) measures the value of current production at current prices.
- Real GDP (GDPr) measures the value of current production at base year price (year
2000 in Vietnam).
=> Values for GDPr are adjusted for differences in price levels while figures for
GDPn are not.
- Purchasing Power Parity [PPP – GDP theo phương thức ngang giá sức mua]: is
applied when comparing the purchasing power in two different countries using GDP.
The prices in each country are different, the exchange rate always changes. Assuming
that the price of a similar basket of goods and services in two countries is the same
(adjust the ratio), then compare the output.
- 2 approaches to GDP
Expenditure Approach Income Approach
Consumption by households Wage
+ +
Investment by businesses Rent
+ +
Government spending Interest
+ +
Expenditures by foreigners = GDP = Profit
+
Statistical discrepancy
 /dɪˈskrepənsi/ [điều chỉnh
thống kê
=> GDP = C+I+G+NX => GDP = W+R+I+P+S
NX [Net Export: Xuất khẩu
ròng = E – I]

1.3. Consumer Price Index – CPI [Chỉ số giá tiêu dùng]

- CPI computes the cost of a FIXED basket of consumer goods in the base year and
the year of interest.
basket at current prices
CPI = basket at base year prices

1.4. Measuring Economic Growth [Đo lường tăng trưởng]

- The economic growth rate is the percentage change in real GDP from current year
to the previous year.
1.5. Unemployment [Thất nghiệp]
- Unemployment refers to in labour force, the people have no job but are seeking to a
job.
- The Unemployment rate is the percentage of the labour force is unemployed.
Number unemplyed
Unemployment Rate = Labor Force
x 100

- The natural unemployment is the unemployment that does not go away on its own
even in the long run. It is the amount of unemployment that the economy normally
experiences.

- Types of unemployment:
(1) Cyclical unemployment [Thất nghiệp tuần hoàn]: is associated with short-term ups
and downs of business cycle.
(2) Frictional unemployment [Thất nghiệp tạm thời]: it takes time for workers to
research for the jobs that are best reasonable their taste and skills.
(3) Structural unemployment [Thất nghiệp cấu trúc]: because the number of jobs
available in some labour markets is insufficient to provide a job for everyone who
wants a job.
1.6. Inflation and Deflation [Lạm phát và Giảm phát]
- Inflation is an increase in the overall price level.
- Hyperinflation /ˌhaɪ.pə.rɪnˈfleɪʃ.ən/ [siêu lạm phát]: is a period of very rapid
increases in the overall price levels.
- Deflation is a decrease in the overall price levels. Prolonged periods of deflation can
be just as damaging for the economy as sustained inflation.
- Economists measure these changes by the price index. The theory of money
quantity states that changes in price level are directly related to changes in money
supply.
1.7. Recession and Depression [ Suy thoái và Đại suy thoái]
- A recession is a period during which aggregate output declines. Two consecutive
quarters of decrease in output signal a recession.
- A prolonged and deep recession becomes a depression.
1.8. Money supply [Cung tiền]
- The Money Supply (MS) is the total amount of monetary assets available in an
economy at specific time. Money supply includes currency in circulation and demand
deposits at commercial banks.
- The Money Base (MB) [tiền cơ sở] is the money issued by central bank. It is
currency in circulation and reserves in commercial banks.
- The Money Multiplier (mm) [số nhân tiền] is used to measure the increase of money
supply. mm is affected by two factors: reserve of commercial banks and the ratio of
currency outside banks to deposit.
- MS = MB x mm
- MS = Cu + D = Currency outside banks + Deposits
[Cung tiền = Tiền mặt lưu thông ngoài ngân hàng + Tiền gửi trong ngân hàng, trường
hợp tiền gửi được trao đổi qua lại và gửi đi gửi lại nhiều lần thì deposits được tính
bằng tất cả các lần gửi trừ đi dự trữ bắt buộc cho mỗi lần].
- MB = Cu + R = Currency outside banks + Reserve
=> MB is always smaller than MS (MB < MS)
* M0: the total notes and cash in circulation. M0 is referred to as the
monetary base or narrow money.
* M1: M0 + Demand Deposits [tiền gửi không kỳ hạn]. Bank reserves are not
included in M1.
* M2: M1 + Saving Deposits [tiền gửi tiết kiệm] + Time Deposits [tiền gửi có
kỳ hạn]. M2 is a key economic indicator used to forecast inflation.
* M3: M2 + Large and Long-term Deposits [tiền gửi dài hạn, tiền gửi lớn, trái
phiếu, tín phiếu].
1.9. Liquidity [Tính thanh khoản]
- Liquidity means how quickly you can get your money on your hands, how easy to
exchange the asset to cash without changing the price.
1.10. Central Bank [Ngân hàng Trung Ương]
- Central Bank is an institution that manages a state’s currency, money supply and
interest rate. Central bank also oversees the commercial banking system of its
country.
- The money supply is controlled by the central bank through:
(1) Open Market Operation – OMO [Nghiệp vụ thị trường mở]
+ Open market is the central bank’s market used to buy or sell state bonds.
+ To raise money supply, central bank buys state bonds at open market that
means money base increases and vice versa.
(2) Changing the Reserve Requirement [Thay đổi tỷ lệ dự trữ bắt buộc]
 + Central bank increases reserve requirement which is the minimum reserve rate
of commercial banks => money multiplier decreases => money supply deceases.
+ Reserve requirement is low, money multiplier is high which are good
conditions to expand credit scale [hoạt động tín dụng/cho vay] => money supply
increases.
(3) Changing the Discount Rate [Điều chỉnh lãi suất chiết khấu]
+ Discount rate is applied by central bank to commercial banks’ loan. The loan
is to ensure commercial banks are enough or increase their reserves.
+ Discount rate is lower than interest rate and borrowing conditions are simple
=> encourage commercial banks borrow from central bank to increase reserves
and expand credit scale => MS increases and vice versa.

2. ECONOMIC MODELS
2.1. Aggregate Demand – Aggregate Supply model (AD-AS model) [Mô hình
tổng cầu – tổng cung]
- Economists use AD-AS model to explain
short-run fluctuations in economic activity
around its long-run trend.
- AD-AS model explains price level and output
through the relationship of aggregate demand
and aggregate supply to reach the balance.
2.2. Interest rate of Saving – Liquidity preference Money supply (IS-LM model)
[Mô hình Lãi suất và cung tiền]
- The IS-LM model shows how the market for
economic goods, interacts with money market.
- It is represented as a graph in which the IS-LM
curves intersect to show the short-run equilibrium
between interest rate and output.
- In the example, the IS curve moves to right
causing higher interest rates and expand output.
2.3. Growth model [Mô hình tăng trưởng]
- Productivity can only increase in the long-run by investment in technology
advancement. This model begins with a production function where national output is
the product of two inputs: capital and labour which are assumed as constant rates
without the fluctuations in unemployment and capital utilization.
3. ECONOMIC POLICIES
3.1. Monetary Policy [Chính sách tiền tệ]
- Definition: Monetary policy is a set of economic policy that manages the size and
growth rate of the money supply in an economy. It is a powerful tool to regulate
macroeconomic variables such as inflation and unemployment.
- The central bank is responsible for formulating monetary policy.
- Tools of monetary policy: (1) Open market operation, (2) Changing reserve
requirement, (3) Changing discount rate.
- Types of monetary policy: depending on its objectives, monetary policy can be
“expansionary” [chính sách tiền tệ mở rộng] or “contractionary” [chính sách tiền tệ
thắt chặt].
+ Expansionary policy: it aims to increase the money supply by decreasing
interest rates, purchasing government securities and lowering reserve
requirement. An expansionary policy lowers unemployment and stimulates
business activities and consumer spending. The goal of this policy is to fuel
economic growth, however, it can lead to higher inflation.
+ Contractionary policy: it aims to decrease the money supply by raising interest
rates, selling government bonds and increasing reserve requirement. This policy
is utilized when government wants to control inflation levels.
3.2. Fiscal Policy [chính sách tài khóa]
- Definition: Fiscal policy is a set of economic policies that influent the economy by
government spending and taxation.
- The central bank implements this policy to create healthy economic growth.
- Tools of fiscal policy: (1) Taxation includes income, capital gains from investment,
property and sales. Taxes provide funds to the government, thus raising taxes, money
supply in circulation decreases; (2) Government spending includes subsidies,
transfer payments such as welfare programmes, public work projects.
- Types of fiscal policy:
+ Expansionary: government either spends more, cuts taxes or both. The
increased demand forces businesses to add more jobs.
+ Contractionary: that is to stamp out inflation. Taxes are increased and
spending is cut.
3.3. Comparison two these policies
- Economists usually favour monetary over fiscal policies because the former suffers
fewer lag than the latter. Central bank quickly make and perform decisions while
discretionary fiscal policy may make time to pass and even longer to carry out.

7. BUSINESS MANAGEMENT
1. Definition
- Business management is the series of activities such as controlling, monitoring,
organising and planning to maintain and promote business work of a company or
groups in a particular sector.

2. Functions of Business Management

2.1. Planning
- Planning includes identifying operation target, building overall strategy, predicting
future and determining methods to achieve given goals and reduce risks.
- In general, a business has planning system including Target Planning [hoạch định
mục tiêu], Strategic Planning [hoạch định chiến lược] and Operational Planning
[hoạch định tác nghiệp].
- Process of Planning:
(1) Management by Objectives (MBO) [mô hình quản trị theo mục tiêu]: refers to in
goal setting and action plans encourages participation and commitment among
employees, as well as aligning objectives across the organisation. The major benefits
of MBO are that it improves employee motivation and allows for better
communication between managers and employees.
- Given targets have to follow SMART principle: Specific [cụ thể], Measurable [đo
lường được], Achievable [khả thi], Realistic [thực tiễn], Timebound [có thời hạn].
* Strategic Planning: provides overall direction to the business and involves
identifying the organisation’s objectives, developing policies and plans to achieve
these given goals and then allocating resources fit to plans.
(2) Boston Matrix
- Build [xây dựng]: invest in products to increase
market share, applied to Question. High
Question Star
- Hold [giữ]: applied to Cow to maximize profits.
Market
- Harvest [thu hoạch]: be suitable with Cow Growth
or Question which focus on profit in short-term.
Dog Cow

Low
- Divest [từ bỏ]: eliminate non-profit product
or business body to allocate resources to
Market
efficient others, applied to Question cannot Share

change to Star and to Dog.

(3) SWOT Matrix
- SO: use Strength to hold external
Opportunities.
- WO: improve Weakness by hold external
Opportunities.
- ST: use Strength to limit external
Threats.
- WT: offensive strategies to reduce internal
Weakness and avoid external Threats.
3. Human Resources Management
- Definition: Human resource management is designed to maximize employee
performance in service of employer’s strategic objectives. It is the combination of a
lot of activities such as recruitment [tuyển dụng], training [đào tạo], personal
evaluation [đánh giá] and rewarding [khen thưởng].
- Models of human resources management:
(1) Secretary Model [mô hình thư ký]: is administrative model related to reporting,
information data and daily tasks.
(2) Legacy Model [mô hình luật pháp]: focuses on the understanding of legal system
to help business avoid labor conflicts relating to law.
(3) Finance Model [mô hình tài chính]: makes the employee income structures
harmoniously between wage – allowance – rewarding – welfare.
(4) Management Model [mô hình quản trị]: emphasizes the roles of human resources
managers who is the bridge between top employers and employees.
- Factors affects to HRM:
(1) External environment: macroeconomics factors, population and labor,
legislation, social cultures, technology, consumers and competitors.
(2) Internal environment: primary objectives and strategies of businesses,
corporation culture and trade union.
(3) Human factor [nhân tố người lao động]: each individual has the different
characteristics, ambitions and hobbies, thus, HR managers need apply proper
methods for each. The salary is the main income of employees and directly affects to
their lives.
(4) Manager factor: the top managers draw out the policies and orientation for the
business development path. Therefore, they have to be qualified to their positions
such as comprehensive knowledge, distance vision.
4. Production Management [quản trị sản xuất]
- Definition: Production management relates to planning, organizing and controlling
the entire production process from managing whole inputs to creating the most
efficient outputs.
- Targets of Production management: produce outputs with adequate quantity and
exact quality at the right time and reasonable cost.
- Process of Production management: (1) predict products demand of using, (2)
design products and technology, (3) manage firm’s capacity of production, (4) create
business positioning, (5) arrange production areas, (6) make general plan [covering
all aspects of production such as production demand, labour, machines, raw
materials,…], (7) intervene production [điều tiết sản xuất, điều phối công nhân, máy
móc hoạt động để đảm bảo đúng tiến độ], (8) control production system [manage
storage and assess quality].
5. Corporate Finance Management [quản trị tài chính doanh nghiệp]
- Definition: Corporate Finance Management refers to the efficient management of
money in such manner as to accomplish business’ objectives. It is the specialized
function directly associated with the top management.
- It concludes how to raise the capital, allocate capital budget in both long-term and
short-term (like current assets). It also deals with the divided policies of share
holders.
- Roles of CFM: (1) ensure raising capital fully and timely, (2) monitor, track all of
operations related to production and business, (3) use capital efficiently.
- Solutions for raising capital: (1) make raising capital plan fit to market conditions,
(2) build trust and prestige /pre’sti:ʒ/ to capital suppliers, (3) prove the target and
method using capital, (4) vary capital forms and resources, (5) evaluate and analysis
regularly business results following business ratio.

8. INTERNATIONAL MARKETING
1. Definition: International Marketing is defined as the performance of business
activities designed to plan, price, promote, and direct the flow of a company’s goods
and services to consumers or users in more than one nation for a profit.
2. Roles of International Marketing:
- Detecting consumers’ need, orienting businesses operation
- Providing a link between businesses and market, harmonizing the benefits of
businesses, consumers with social benefits.
- Being a competitive tool creates businesses positioning.
* Conditions: Other business’ activities operate based on targets, strategies of given
Marketing; vice versa, Marketing plans, strategies are suitable with other resources.
3. Marketing Process

R STP MM I C

(1) R - Research [nghiên cứu thông tin marketing]: collect, analysis marketing
information such as market size, consumers and business environment.
(2) STP – Segmentation, Target, Positioning
- Segmentation [phân khúc thị trường]: is a process of dividing market into specific
consumer groups following different demands of products, consuming behaviors.
- Target [chọn thị trường mục tiêu]: choose consumer groups as following target and
provide superior value to them.
- Positioning [định vị]: make the awareness and differences about products in
consumers’ perspectives.
(3) MM - Marketing Mix [Marketing hỗn hợp]
* 4P – Product, Price, Promotion, Place
- Product: a product is an item that is produced to satisfy the needs of certain
consumer groups. Every product has a certain life cycle that includes the growth
phase, the maturity phase and the sales decline phase. So, the marketers must do an
extensive research on the life cycle of the product they are creating to stimulate more
demand once it reaches the final phase.
- Price: the price is the amount that a consumer pays for to enjoy a product. Price is a
very important component of marketing mix as it determines a business’ profit and
survival. When setting the product price, marketers should consider the perceived
value that product offers and be sure to examine competitors pricing to set a
reasonable price. There are three major pricing strategies: market penetration pricing
[giá thâm nhập thị trường], market skimming pricing [thị trường trượt giá] and
neutral pricing.
- Promotion: it can boost brand recognition and sales. Promotion is comprised of
various elements like: sales organization, public relations, advertising, sales
promotion.
- Place: refers to position and distribute the product in a place that is accessible to
potential buyers. There are many distribution strategies, including: intensive
distribution, exclusive distribution, selective distribution and franchising.
* 7P – People, Process, Physical Evidence
- People: the company’s employees are important in marketing because they are the
ones who deliver the service. It is internal competitive advantage a business can have
over competitors which can inherently affect a business’s position in the marketplace.
- Process: the system and process of the organization affect the execution of the
service. So, the business has to make sure that it has a well-tailored process in place
to minimize costs and maximize profits.
- Physical Evidence: it is the business’ presence and establishment such as branding
which is manipulated in consumer perception firstly. For example, when you think of
“fast food”, you think of McDonalds or when you think of sports, the names Nike and
Adidas come to mind.
(4) I – Implementation [triển khai kế hoạch]: implement Marketing plans through
building certain action programmes, organizing human resources.
(5) C – Control [kiểm soát]: track, evaluate strategies to measure marketing
efficiency and design action adjustment.
4. Distinctions between Marketing, Advertising and Public Relations
- Both Advertising and Public Relation (PR) are just single components of marketing
process. Marketing includes advertising, public relations, market research, media
planning, product pricing, distribution, customer support, sales strategy and
community involvement.
- Advertising: is a form of marketing communication used to encourage, persuade
audiences to take or continue taking some action,
- Public Relations: is the practice of managing the spread of information between
individual, an organization or the public. The aim of PR activity is persuade the
public, prospective consumers, investors, partners, employees and other stakeholders
to maintain belief in company’s leadership, products.
5. Marketing Strategy
- Marketing strategy: The field of marketing strategy considers the total marketing
environment and its impacts on a company, products. The emphasis is on an in depth
understanding of the market environment, particularly the competitors and
consumers. Strategy refers to long-term while tactic applied in short-term.
- Target market: is a group of consumers that a business has decided to aim its
marketing efforts and ultimately its merchandise. Variables of target market are age,
income, education, genders, religions, lifestyle,…
- Buying behavior: to entice and persuade consumers to buy products, marketers try
to determine the behavioral process of how the given products are purchased.
+ B2C buying behavior (Business to Customer) [hành vi mua của người tiêu dùng]: is
all consumers’ actions showed in investigation of purchasing, using and evaluating
products or services to satisfy their needs.
+ B2B buying behavior (Business to Business) [hành vi mua của doanh nghiệp]:
includes organizations buying goods or services which are the inputs to produce other
goods or services that are sold or leased to others.

9. REGIONAL INTEGRATION &

INTERNATIONAL ECONOMIC ORGANISATIONS
1. Regional Integration
- Definition: Regional Integration is the process by which two or more nation-states
agree to co-operate and work closely together to achieve peace, stability and wealth.

1.1. European Union – EU [Liên minh châu Âu]

- Why is European Union: The EU’s mission in the 21st century is to maintain and
build the peace established between its member states, bring European countries
together, ensure security, promote economic and social solidarity, preserve European
identity and diversity, promulgate the European values.
 Head quarter: Brussels (Belgium). European Day: 9th May.
- The historic steps:
 1951: The European Coal and Steel Community (ECSC) were set up by six
founding members including Western Germany, Belgium, France, Italy, Luxembourg
and The Netherlands).
 1957: Setting up The European Atomic Energy Community (Euratom) and the
European Economic Community (EEC).
 1979: The first direct elections to the European Parliament.
 1992: The European single market became a reality (great achievement).
 1993: The Treaty of Maastricht established to create EU.
 2002: The Euro comes into circulation.
 2009: The Lisbon Treaty came into force, changing the way the EU worked.
 2013: EU officially had 28 member states.
 2016: The U.K. organized the referendum to leave the EU. Until now, Britain and
EU have continued to discussing about Brexit.
- How does the EU work?
 The EU’s Heads of State and/or Government meet, as the European Council, to set
the EU’s overall political direction and to take major decisions on key issues.
 The Council, made up of ministers from the EU Member States, meets frequently
to take policy decisions and make EU laws.
 The European Parliament, which represents the people, shares legislative and
budgetary power with the Council.
 The European Commission, which represents the common interest of the EU, is
the main executive body. It puts forward proposals for legislation and ensures that
EU policies are properly implemented.
1.2. Association of South East Asian Nations – ASEAN [Hiệp hội các quốc gia
Đông Nam Á]
- Why was ASEAN established in 1967?
 After independence, some countries realized they need co-operate to develop.
 Some countries wanted to limit the U.S.’s affections to their area, especially, at
that time, the signal of failures of the U.S. was clearer in Vietnam war.
 There were some regional organisations such as EEC encouraging South East
Asian Nations found a way to co-operate.
- Formation process:
 ASEAN was established on 8th August-1967 in Bangkok, Thailand with 5
founding members including Indonesia, Malaysia, the Philippines, Singapore and
Thailand.
 Vietnam officially joined ASEAN in 1995.
 At this time, ASEAN has 10 member states: Vietnam, Malaysia, Indonesia,
Singapore, the Philippines, Thailand, Brunei, Laos, Cambodia, Myanmar.
- Fundamental Principles:

(1) Mutual respect for the independence, sovereignty, equality, territorial integrity,
and national identity of all nations;

(2) The right of every State to lead its national existence free from external
interference, subversion or coercion;

(3) Non-interference in the internal affairs of one another;

(4) Settlement of differences or disputes by peaceful manner;

(5) Renunciation of the threat or use of force; and

(6) Effective cooperation among themselves

- Aims and purposes:

(1) To accelerate the economic growth, social progress and cultural development in
the region

(2) To promote regional peace and stability

(3) To promote active collaboration and mutual assistance on matters of common

interest in the economic, social, cultural, technical, scientific and administrative
fields;

(4) To maintain close and beneficial cooperation with existing international and
regional organisations with similar aims and purposes.

- The ASEAN Community is comprised of three pillars, namely the ASEAN

Political-Security Community, ASEAN Economic Community and ASEAN Socio-
Cultural Community.

 ASEAN Political-Security Community

- Political Co-operation: a rules-bases community of shared values and norms.
- Security Co-operation: a cohesive, peaceful, stable and resilient region with
shared responsibility for comprehensive security.
- External Relations: a dynamic and outward-looking region in an increasingly
integrated and interdependent world.

 ASEAN Economic Community (AEC): is established in 2015, which is major

milestones in the regional economic integration, principles based on 4 main pillars

- Pillar 1: Single market and production base [thị trường đơn nhất và cơ sở sản
xuất chung: tự do lưu chuyển hàng hóa, dịch vụ, đầu tư, vốn, lao động có tay
nghề].
- Pillar 2: Competitive economic region [khu vực kinh tế cạnh tranh: thông qua
các khuôn khổ chính sách về cạnh tranh, bảo hộ người tiêu dùng, quyền sở hữu trí
tuệ, thuế quan, thương mại điện tử, pt cơ sở hạ tầng].
- Pillar 3: Equitable Economic Development [phát triển kinh tế cân bằng: được
thực hiện thông qua phát triển các doanh nghiệp vừa và nhỏ, thực hiện sáng kiến
Hà Nội nhằm thu hẹp khoảng cách phát triển].
- Pillar 4: Integration into Global Economy [hội nhập vào kinh tế toàn cầu: tham
vấn chặt chẽ trong đàm phán với đối tác và trong tiến trình tham gia vào mạng
lưới cung cấp toàn cầu].

 ASEAN Socio-Cultural Community:

- Building an ASEAN community of an enduring solidarity and

- Unity forged by common identity
- Building a inclusive and harmonious caring and sharing society
- An enhanced well-being, livelihood and welfare of the people.

1.3. Asia-Pacific Economic Co-operation – APEC [Diễn đàn Hợp tác kinh tế
châu Á – Thái Bình Dương]

- Why was born?

 WORLD: The increase of globalisation causes all countries become

interdependent on each other, Uruguay round was more and more felt clearly => the
importance of economic development, the advent of regional trade blocs in the world.

 REGION: growing interdependence of Asia-Pacific economies; lack of

mechanism for co-operation.
 KEY PLAYERS: The fears of Japan’s dominance in Asia-Pacific region. ASEAN
desired to establish new market beyond Europe.

- Historical Establishment:

 1989: in the speech of Former Prime Minister of Australia, Mr. Bob called for
more effective economic co-operation across the Pacific region. Therefore, 12 Asian-
Pacific economies met in Canberra, Australia created APEC together. Headquarter:
Singapore.

 1989-1998: APEC has fully 21 memberships including Australia, Brunei, Canada,

Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore,
Thailand, the U.S., China, Hong Kong, Chinese Taipei, Mexico, Papua New Guinea,
Chile, Peru, Russia and Viet Nam.

- Three pillars:

 Trade and Investment Liberalisation: bring more economic benefits to member

economies through eliminating tariff and non-tariff barriers.

 Business Facilitation: focus on cutting transaction costs, promoting information

exchange and free-trade.

 Economic and Technical Co-operation: implement ECOTECH programme to

support develop labour force, enhance ability of all members to achieve the goals of
equality, balance and sustainability within the region.

2. International Economic Organisations

2.1. World Trade Organisation – WTO [Tổ chức thương mại thế giới]

- Why was born? After World War II, the U.K. and the U.S. submitted to the U.N.:
establishment of International Trade Organisation (ITO). However, the plan to create
the ITO was abandoned by the U.S. Congress.

Meanwhile, a group of 17 countries in Geneva created General Agreement on Tariffs

and Trade (GATT) to lower trade barriers and tariffs among themselves. But, GATT
contains very little institutional structure, so, they needed a word-wide trade-
regulating body.

In January 1st, 1995, WTO was established based on Uruguay round (1994).

- WTO is guardian of the multilateral trading system

 establish international trading rules on goods, services,...

establish matrix of rights and obligations

a negotiation forum for market access and rules-concessions

a place to settle dispute

- Principles of WTO trading system:

 Avoid discriminatory trade: Most favoured-nation (MFN) and National treatment.
 Support freer trade: Border protection to be restrained and progressively reduced.
Enhance predictability (transparency and biding obligations)
 Promote fair competition
 Encourage development and economic reform.
- The Doha Round collapsed which negatively affects to the prestige of WTO:
 It was enormous agenda (agriculture, services, rules,…)
 Members could not reach an agreement about free-trade, cut agricultural subsidies
and trade support.
 The U.S, India, China could not be consistent in protected poor farmers solutions.
 General Director of WTO was unsuccessful in reducing tensions between the
developing and the developed countries.
2.2. International Monetary Fund – IMF [Quỹ tiền tệ quốc tế]
-Why was born? To build a framework for economic co-operation to avoid a
repetition of the competitive devaluations that had contributed to the Great
Depression of the 1930s.
- The IMF was established in 1944 at the Bretton Wood international conference in
New Hampshire, the U.S. Its headquarter is in Washington, D.C., it includes 188
members.
- Purposes of IMF:
 To promote international monetary co-operation
 To facilitate the expansion and balanced growth of international trade
 To promote exchange stability
 To assist in the establishment of multilateral system of payments
 To provide available resources with reasonable protection to members who are in
difficulty in international balances of payments.
- Responsibilities of IMF: ensure the stability of international monetary system
(include all the macroeconomic and financial issues to stabilize global economy).
- Functions of IMF (includes 3 main functions):
(1) Monitoring: monitor global economic situations as well as members and consult
suitable economic policies.
(2) Lending: provide loans (financial aid) to help members balance international
payment, rebuild international reserves and stabilize national monetary system.
(3) Technical Supporting: help members create economic policies and manage
finance efficiently via enhancing human ability and regime through training and
technical facilities.
- Financial resources of IMF:
 The main financial resources of IMF are derived from member states’ stake and
IMF’s accumulation. At first, the contributed stakes depend on the quota of export &
import of each member compare to the world.

 When joining IMF, each member country assigned a quota equals ¼ foreign
currencies such as US Dollar, Euros, Yen, Pound or Special Drawing Rights (SDRs)
and plus ¾ domestic currency.

Note: Special Drawing Rights is a international reserves form created by IMF in

1960s. It is artificial currency designed to increase the liquidity in circulation. SDRs
include the U.S. Dollar, Euro, Yen, Pound and Yuan.
2.3. Word Bank – WB [Ngân hàng thế giới]
- Why was born? WB was established in 1944, in Bretton Woods, has headquartered
in Washington D.C.
- The purpose of WB: because of poor countries
(1) Eliminating barriers and promote investment from developed countries to poor
countries.
(2) Assisting government of poor countries in building public infrastructure,
environmental protection, sickness fighting,...
(3) Assisting in developing economy, education, social status,...
- WB is an organisation including 5 relatively independent bodies:

(1) International Development Association - IDA (1960) [Hiệp hội Phát triển quốc
tế]: provides financial aids to the poorest countries through no interest loans or non-
refundable aids to help poverty reduction and improve living standard.

(2) International Bank for Reconstruction and Development - IBRD (1945) [Ngân
hàng tái thiết và phát triển quốc tế]: provides finances to help medium-low income
countries or poor countries which are prestigious in borrowing.

(3) International Finance Company - IFC (1956) [Công ty Tài chính quốc tế]:
supports private sector through providing loan in long-term, investment in stock,
guarantee , risk management and consulting services.

(4) International Centre for the Settlement of Investment Disputes – ICSID (1966)
[Trung tâm quốc tế về giải quyết tranh chấp đầu tư]:
promotes international investment by providing mediation facilities and arbitration on
disputes between governments and investors, and researches and publishes foreign
investment law publications.

(5) Multilateral Investment Guarantee Agency – MIGA (1988) [Cơ quan bảo lãnh
đầu tư đa biên]: helps developing countries attract foreign investment by providing
non-market guarantees for investors. Besides, it also provides technical support
services to announce investment opportunities.

10. PUBLIC FINANCE

1. Definition: Public Finance is the study of the role of the government in the
economy. It is the branch of economics which assesses the revenue and expenditure
of the government and public authorities.

2. Structure of Public Finance: State Budget and State Financial Funds outside
State Budget.

- State Budget plays an important role in Public Finance. Revenue resource mainly
derives from taxes which is compulsory, besides, other resources are charges, fees,
state assets selling and external debt,…

- State Financial Funds outside State Budget is monetary fund established, used and
managed by the government to address abnormal fluctuations in the process of
economic-social development.

+ State Reserve (tangible assets), Financial Reserve, Foreign Currencies Reserve,

Anti-Heroin Fund, Environmental Protection Funds, Social Insurance Fund,….

3. Public goods [hàng hóa công cộng]: are the indivisible goods, cannot be priced
thus the principles of exclusion does not apply [ko thể định giá và áp dụng quy tắc
loại trừ.

- Non-rival in consumption [ko có sự cạnh tranh trong tiêu dung hàng hóa công cộng]

- Free-rider problem [vấn đề trục lợi]: pp can enjoy the benefits of public goods
whether pay for them or not.

4. The Role of Public Finance:

- Public finance ensures the existence and operation of state bodies.

- Public finance controls, directs and adjusts financial activities of other economic-
socio subjects. [TCC có vai trò chi phối, hướng dẫn và điều chỉnh các hoạt động tài
chính của các chủ thể kinh tế-xã hội khác].

- Public finance ensures production economy operating efficiently.

- Public finance implements social justice.

5. Public Finance Management

- Definition: PFM is the process that government plans, builds policies, uses system
of proper tools, methods affecting to public finance to develop economy.

- Features of PFM: (1) achieving highest utility, (2) focusing on entire social utility
and (3) ensuring efficient economic operation and social justice.

6. Tax: is revenue form of State budget, is compulsory and not directly refundable. It
is a form of social properties distribution.
- The efficiency of tax collection is considered in the relationship between the cost of
managing tax collection and the amount of tax in state budget.

- The government regulate the tax level of each individuals based on the income,
consumption level and assets.

7. Charge, Fee [phí, lệ phí]

- Charge: is the revenue to recover the investment cost of non-pure public services
following legal regulations and it is the money that organizations, individuals have to
pay when using these services.

- Fee: is the revenue associated with the providing of direct administrative services of
State to individuals or organisations.

11. ACCOUNTING PRINCIPLES

1. Definition: Accounting is the measurement of financial information about an

organisation’s economic activities and conveys this information to a variety of users
including investors, creditors, regulators,…

2. Classification: Accounting can be divided into 4 main types:

+ Financial accounting: focuses on the reporting of an organization's financial

information, including the preparation of financial statements, to external users of the
information, such as investors, regulators and suppliers.
+ Management accounting: focuses on the measurement, analysis and reporting of
information for internal use by management.
+ Auditing: Auditing is the verification of assertions made by others regarding a
payoff,[31] and in the context of accounting it is the "unbiased examination and
evaluation of the financial statements of an organization.
+ Tax accounting: tax accounting concentrates on the preparation, analysis and
presentation of tax payments and tax return.
3. Balance Sheet [Bảng cân đối kế toán]: In financial accounting, a balance
sheet or statement of financial position is a summary of the financial balances of
a sole proprietorship [/prə'praɪətə(r)ʃɪp/ quyền sở hữu], a business partnership,
a corporation or other business organization. Assets, liabilities and ownership
equity [vốn chủ sở hữu] are listed as of a specific date, such as the end of its financial
year. A balance sheet is often described as a "snapshot of a company's financial
condition" [tổng quan tình hình tài chính công ty].
- Assets [tài sản] = Current assets [tài sản ngắn hạn] + Non-current assets (fixed
assets) [tài sản dài hạn]
+ Current assets= Cash and cash equivalents [tiền mặt bao gồm ngoại tệ, khoản
tương đương tiền mặt] + Accounts receivable [tài sản, nợ phải thu] + Prepaid
exprenses for future service using [khoản trả trước cho người bán] + Deposits Paid
[Các khoản đem đi đặt cọc] + Allowance for Doubtful Accounts [Dự phòng nợ khó
đòi] + Short-term Investment [Đầu tư ngắn hạn] + Inventory [hàng tồn kho].
Current assets are important to businesses because they are the assets that are used
to fund day-to-day operations and pay ongoing expenses.
+ Non-current assets = Property, plant and equipment [đất đai, nhà xưởng, thiết bị
máy móc] + Investment property, such as real estate held for investment purposes
[các tài sản đầu tư] + Intangible assets [/ɪn'tændʒəbl/ tài sản vô hình] + Financial
assets [tài sản tài chính: không bao gồm tiền, các khoản đầu tư ngắn hạn, nợ phải thu]
+ Investments accounted for using the equity method [các khoản đầu tư vào công ty
con] + Biological assets [các tài sản sinh học: gia cầm, gia súc, cây cối, …]+
Accumulated Depreciation [Khấu hao lũy kế; mang giá trị âm].

Liabilities [nợ] = Current liabilities [Nợ ngắn hạn =< 1 year] + Long-term
Debts/Liabilities [nợ dài hạn> 1 year]
+ Current liabilities = Accounts payable [khoản phải trả người bán] + Salaries
Payable [Lương phải trả] + Interest payable [Lãi vay phải thanh toán] + Tax payable
[thuế phải nộp] + Security Deposit [Khoản kí quỹ = khoản do cty khác đặt cọc] +
Unearned revenue for services paid for by customers but not yet provided [tiền đã
nhận của người mua nhưng chưa cung cấp dịch vụ=thanh toán trước]
+ Long term debts = Note payable [các khoản nợ tài chính: trái phiếu, giấy ghi nợ>1
year]
Equities [Vốn] = Owner capital/Common stock [cổ phiếu phổ thông] + retained
earnings [Lợi nhuận giữ lại]

Total Liabilities + Equities = Total Assests.

Sample:
Assets Liabilities and Owner's Equity
Current Assets Current Liabilities
Cash Accounts payable
Accounts receivable Short-term loans
Inventory Income taxes payable
Prepaid expenses Accrued salaries and wages
Short-term investments Unearned revenue
Total current assets Current portion of long-term debt
Fixed (Long-Term) Assets Total current liabilities
Long-term investments Long-Term Liabilities
Property, plant, and equipment Long-term debt
(Less accumulated depreciation) Deferred income tax
Intangible assets Other
Total fixed assets Total long-term liabilities
Other Assets Owner's Equity
Deferred income tax Owner's investment
Other Retained earnings
Total Other Assets Other
Total owner's equity
 Total Assets Total Liabilities and Owner's Equity

* Common financial ratios:

Debt Ratio (Total Liabilities / Total Assets) [tỉ lệ nợ/tài sản]
Current Ratio (Current Assets / Current Liabilities)[tỉ lệ tài sản lưu động/nợ ngắn
hạn]
Working Capital (Current Assets - Current Liabilities)[vốn lưu động] is a financial
metric which represents operating liquidity available to a business. [đo mức độ thanh
khoản]
Assets-to-Equity Ratio (Total Assets / Owner's Equity)[tỉ lệ tài sản/vốn chủ sở hữu]
Debt-to-Equity Ratio (Total Liabilities / Owner's Equity)[tỉ lệ nợ/vốn chủ sở hữu]

Income statement [Báo cáo doanh thu]:is one of the financial statements of a
company and shows the company’s revenues and expenses during a particular period.
- Sales: Doanh thu từ hoạt động SXKD.
- Cost of goods sold: Giá vốn hàng bán. [Including the salary of workers directly
making goods]
- Wage expense: CP Lương.
- Rent expense: CP thuê.
- Office expenses: CP văn phòng (điện nước, VPP)
- Depreciation Expense: CP khấu hao
- Bad Debt expense: Nợ xấu
- Insurance expense: CP bảo hiểm
- Interest expense: Trả lãi ngân hàng
- Income Tax expense: CP thuế thu nhập doanh nghiệp

GROSS INCOME [Lợi nhuận gộp] = Sales Revenue – Cost of goods sold. [Doanh
thu – Giá vốn hàng bán]
IFO [The Income from Operations] = EBIT [earnings before interest expenses
and tax expense] = GROSS INCOME – Total EXPENSES (exclude Interest expense
and Tax expense)
EPS [earnings per share] = (NET INCOME [lợi nhuận sau thuế, lãi vay] –
DIVIDENS [trả cổ tức])/OUTSTANDING SHARES [tổng cổ phiếu phát hành] (tính
trung bình cổ phiếu phát hành trong năm, ví dụ phát hành 6 tháng thì tính ½)
ROE [Return on Equity] = Net Income/Shareholders’ Equities. (ROEs between
15% and 20% are generally considered good). ROE is best used to compare
companies in the same industry
ROA [Return on Assets] = Net Income/Average Assets (ROAs over 5% are
generally considered good) Average assest: tính trung bình đối với các tài sản được
mua trong năm (chỉ sử dụng vài tháng)

 Cash Flow Statement [Bảng dòng tiền]: is a financial statement that shows how
changes in balance sheet accounts and income affect cash and cash equivalents, and
breaks the analysis down to operating, investing and financing activities.
People and groups interested in cash flow statements include:
- Accounting personnel, who need to know whether the organization will be able
to cover payroll and other immediate expenses [NV tài chính-tình hình tài chính có
đủ chi trả lương và chi phí]
- Potential lenders or creditors, who want a clear picture of a company's ability
to repay [người cho vay, chủ nợ-khả năng trả nợ]
- Potential investors, who need to judge whether the company is financially
sound [nhà đầu tư-tài chính công ty có ổn định]
- Potential employees or contractors, who need to know whether the company
will be able to afford compensation [nhân viên-công ty có đủ khả năng trả lương]
- Shareholders of the business. [cổ đông]

12. CORPORATE FINANCE

1. Definition: Corporate Finance is the relations between the corporate and other
subjects in the economy.
- The relation between corporate and the state: is the obligation of tax contribution to
the state and when the state raise capital for the corporate.
- The relation between corporate and financial market: the corporate seeks to
sponsors. On financial market, the corporate can borrow in short-term or issue stakes
or bonds. By contract, the corporate have responsibility for loan and dividend for
sponsors.
- The relation between corporate and other markets: through these markets, the
corporate can determine the demand of goods or services.
- The internal relation: is the relation between production and sale bodies,
shareholders and lenders, the right of using capital and the right of owning capital.
2. The principles of corporate finance management

- Trade-off between risks and profits [Nguyên tắc đánh đổi rủi ra và lợi nhuận]:
investors can choose a variety of projects depending on the risk levels and expected
profits that they could accept.

- Current value of money [Nguyên tắc giá trị thời gian của tiền]: to measure the value
of equity capital, the corporate need calculate the profit and cost of a project at the
current price. The accepted project when its profit is greater than its cost.

- The ability of payment [Nguyên tắc chi trả]: the corporate need ensure the minimum
budget to do the payment.

- Profitability [Nguyên tắc sinh lợi]: managers not only evaluate the cash flow of
project, but also find the profitable projects.

- Efficient Market [Nguyên tắc thị trường có hiệu quả]: in efficient market, the prices
of stakes is informed correctly at all the time, which reflects available information
and value of a corporate.

- Tax affection [Tác động của thuế]: before deciding investment, financial managers
always consider the tax affection, especially corporate income tax. Tax will affect
directly to corporate capital structure and profit.
3. The Analysis of Corporate Finance

- The reports used to evaluate the corporate economic activities: (1) Balance Sheet,
(2) Income Statement, (3) Statement of Cash Flows, (4) The Description of Financial
Statement.

- Analysis of Corporate Finance: is the using the concepts, methods and tools to
collect and handle accounting information and other information of corporate
management to assess financial situation, ability and potential of a corporate, which
help information users make reasonable decisions.

- Process of analysis:

+ Information Collection: analysts use all of resources to explain and convince

current financial activity.

+ Information Assessment: analysts classify information following given purposes to

calculate, compare, explain, assess, and detect reasons of achieved results.

+ Prediction and Decision: the main purpose of financial analysis is financial

decision. The owners decide target operation, growth, profit maximization,… lenders
decide investment, managers decide management methods.

4. What are need to analyze?

- The gross revenue equals the price multiply the quantity of goods or services. Net
Revenue is the rest of gross revenue which minuses special tax, import-export duties
[thuế xuất nhập khẩu], trade discount,…

- Net Revenue is not profit. Profit before tax is the portion of net revenue minuses
Cost of goods sold [giá vốn hàng bán], sales expenses [chi phí bán hàng], general and
administrative expenses [chi phí quản lý doanh nghiệp].

- Profit after tax equals profit before tax minuses profit tax [thuế thu nhập doanh
nghiệp] which is collected to state budget.

 Short-term liquidity ratio [tỉ số thanh khoản ngắn hạn] =

Current Assets [tài sản lưu động]
which measures ability of short-term payment.
Short−term liabilities [Giá trị nợ ngắn hạn]

Revenue [ doanhthu ]
 Inventory turnover [vòng quay hàng tồn kho] = Inventory Value[Giá trị hàng tồn kho ]

 Vòng quay càng lớn, doanh nghiệp sử dụng càng hiệu quả, hàng ít ứ đọng.

 Day of sales outstanding [kỳ thu tiền bình quân] =

6. Analysis and the decision to lease

- Asset Leasing is the trade agreement which is established between lessor agrees
with leasee to use leased assets in a specific period to receive fixed period payment.
- Financial Leasing is a type of asset leasing, it could be a medium-term or long-term
credit contract (assets could be mechanism, delivered vehicles,…) and be established
between financial institutions and corporates.
7. Capital Decision
- Business could choose some methods to raise capital as follows:
 Bond Issue
 Long-term stake Cut
 New Securities Issue (bonds not pay interest periodically [trái phiếu không trả
lãi suất định kỳ], periodical bills with floating interest [kỳ phiếu với lãi suất thả
nổi], exchanged bonds [trái phiếu chuyển đổi]).
8. The decision of Disbursement of Dividends [quyết định chính sách cổ tức]
- The policy of disbursement of dividends affects to the firm’s value and stakes.
- The policy needs to be consistent and stable.
- The policy needs to be safe that means with the reasonable ratio.
- The firm needs avoid cutting or reducing dividends even it has great profitable
investment opportunity because this will threaten to the control of current
shareholders.

13. FINANCIAL RISKS MANAGEMENT

1. Definition:

- Financial System Risk: is a complete collapse of the financial system or the

financial market when shocks to the financial system confuse the function of leading
the financial system, especially a financial crisis.
- Financial Monitor: is the monitoring and tracking regularly financial situations to
prevent the collapse of financial system.
- The purposes of Financial Monitor: (1) maintaining the stability of financial
system, (2) ensuring the transparency of financial institutions, (3) protecting
consumers by adjusting the imperfection of financial market.
2. Derivatives [công cụ phái sinh]
- Derivatives are the tools issued based-on initial financial tools such as stakes,
bonds,.. These tools aim to reduce risks, ensure or make profits.
- Forward Transaction: is a special type of foreign currency transaction. Forward
contracts are agreements between two parties to exchange two designated currencies
at a specific time in the future. These contracts always take place on a date after the
date that the spot contract settles and are used to protect the buyer from fluctuations
in currency prices.
- Swap Transaction: is one in which a trader switches over from its existing position
to another position and comes back to his original position with a benefit.
+ Currency swap: The foreign currency rate may be taken advantage of by banks due
to the arbitrage. An arbitrage is the difference in the exchange rate between two
different markets.
[We can explain the currency swap by the following example.
In India, a bank may have 6,000 U.S. dollars. The exchange rate prevailing in India
for 1 U.S. dollar = INR 66,  Pound Sterling = Rs. 100. So, the cross exchange rate
between Pound Sterling and Dollar in India is 1 Pound Sterling = 1.52 U.S. dollars.
Suppose, in London market, 1 Pound Sterling = 2 U.S. dollars, the commercial bank
in India will first convert 6,000 U.S. dollars into rupee and obtain INR 396,000. For
this amount, it will buy Pound Sterling amounting to 3,960 Pound sterling. This will
be taken to the London market and converted into dollars at 2 U.S. dollar per Pound
Sterling. The bank will be able to obtain 7,920 U.S. dollars. This will be brought back
to India. Thus, in the process of swapping, the bank continues to hold dollar but
instead of holding 6,000, it has now have 7,920, an increase of 1,920 dollars. This is
what we call currency swap. Thus, when 2 currencies are exchanged in swap, it is
called cross currency swap.]
+ Interest swap in swap transaction:
Suppose, a person takes a housing loan in 2000 at 17% interest rate, he can approach
a bank now for taking over his old loan for a fresh loan at a lesser rate of interest. The
bank will settle his loan with his previous creditor and takes over the security. The
borrower is now in the same old position, but his loan with the bank carries a lower
rate of interest. This is known as interest swap. This is made possible due to floating
rate of interest and in a floating rate of interest, the interest rate gets reduced
according to market conditions. The borrower switches over from a fixed to floating
interest rate and gains. This is the advantage of swap transactions.
- Options contract: is an agreement between two parties to facilitate a potential
transaction on the underlying security at a preset price, referred to as the strike price,
prior to the expiration date.
The two types of contracts are put and call options.
+ Call options provide the option buyer with the right, but not the obligation to buy
an underlying security at a strike price. Each call option has an expiration date called
the expiry. Buyers of call options are bullish on a stock meaning they want the stock
price to rise above the strike price before the option's expiry.
+ Put options give the owner the right, but not the obligation, to sell shares of a
security at a specified price or strike price and within a set time frame. Buyers of put
options want the stock price to decrease. A put option is profitable when the
underlying stock's price is below the strike price.
- Future contract: First, futures contracts—also known as futures—are marked-to-
market daily, which means that daily changes are settled day by day until the end of
the contract. Furthermore, a settlement for futures contracts can occur over a range of
dates.
Because they are traded on an exchange, they have clearing houses that guarantee the
transactions. This drastically lowers the probability of default to almost never.
Contracts are available on stock exchange indexes, commodities, and currencies. The
most popular assets for futures contracts include crops like wheat and corn, and oil
and gas.
The market for futures contracts is highly liquid, giving investors the ability to enter
and exit whenever they choose to do so.

14. INTERNATIONAL BUSINESS

1. Definition: International business covers all commercial activities that take place
to promote the transfer of goods, services, resources, people, ideas, and technologies
across national boundaries.
2. International business occurs in many different formats:

 The movement of goods from country to another (exporting, importing, trade)

 Contractual agreements that allow foreign firms to use products, services, and
processes from other nations (licensing, franchising)
 The formation and operations of sales, manufacturing, research and
development, and distribution facilities in foreign markets.

3. The import-export situations in Vietnam and Germany in 2018

3.1. Germany
- In 2018, the total value of exported goods worth 1.3 thousand billion Euros while
the figure of imported is 1.1 thousand billion Euros, trade surplus is approximately
228 billion Euros.
- The GDP recorded 3.400 billion Euros. The unemployment rate is rather low,
around 5%.
- The main exported goods include autocar, spare parts, planes, helicopters, packed
medicines.
- The main markets are the U.S., France, China, the U.K., the Netherlands.
3.2. Vietnam
- In 2018, Vietnam’s GDP increased 7.08%. Inflation rate was controlled at 3.54%.
- The total value of export was 243 billion Dollars. The main exported goods are
mobile phones, clothes, machines, shoes, woods and sea products,…
- The total value of import was 237 billion Dollars. The major imported goods are
computers, machines, spare parts, oils,…
3.3. The economic relation between Vietnam and Germany (EU)
- Two-way trade turnover reached 10 billion Dollars, in which Vietnam accounted for
6.8 billion Dollars.
- IUU is Illegal, Unreported and Unregulated fishing. In October-2017, EC imposed a
yellow card warning on Vietnamese seafood for failing to make progress in fighting
IUU fishing.
- Vietnam has made strong efforts to EC leave yellow card. In the end of May to
early June 2019, an inspection delegation from the EC will begin a fact-finding trip to
Vietnam to inspect the implementation of recommendations related to the fight
against IUU fishing.
- The European Union believes that the implementation of the EVFTA will boost our
bilateral trade flows and promote further EU investment in line with the sustainable
development goals included in the FTA.
- Under the Vietnam’s EVFTA commitment, the country would remove 65% of
import tariffs for European goods right after the deal becomes effective. The
remaining would be gradually removed in the next 10 years. 

- In return, the EU is committed to removing 71% of import tariffs for Vietnamese

items, and the remaining in the next seven years.
- The signing and ratification of the EU – Vietnam Free Trade Agreement (EVFTA)
may take place in June or July, after the European Parliament (EP) completes its
elections.