UNIT 1

1. Adam Smith’s theory?

Adam Smith believed that ppl who acted in their own self-interest produced
goods and wealth that benefit all of society. He believed that governments
should not restrict or interfere in the markets because they could regulate
themselves and thereby produce wealth at maximun efficiency

2. Marxism theory?
He believed that capitalism will eventually fail because factory owners and
CEOs exploit laborers to generate wealth for themselves. That exploitation
leads to social unrest and class conflict. To ensure social and economic
stability, he theorized that laborers should own and control the means of
production.

3. Theory of Keynesian School?

Theory of Keynesian school describes how governments can act within
capitalistic markets. They can reduce taxes and increase government
spending when the economy is slowdown. And they can reduce government
spending and increase taxes when the economy is overly active
UNIT 2
1. What is a market economy?
Market economy is an economic system in which the market is supposed to
be regulated by the law of supply and demand. Business firms compete
freely. Direct government intervention is theoretically ruled out although the
government influences the economic situation through its fiscal and
budgetary policies.

2. What is a planned economy?

A planned economy is an economic system whereby the structure of market
is deliberatly planned by the state. Production and consumption quota are
fixed beforehand. There is no real competition between industrial and
commercial organizations. Means of production and channels of distribution
are state controlled.

3. What is a mixed economy?

 A mixed economy is an economic system in which some goods and services
are produced by the government and some by private enterprises. It lies
between free market economy and planned economy.

4. What are the differences between free market economy and planned
economy?
There are some differences between free market economy and planned
economy. Firstly, in a free market economy, the market is regulated by the
law of \supply and demand. On the other hand, in a planned economy, the
structure of market is delibarately planned by the state. Secondly, in a free
market economy, business firms compete freely while in a planned
economy, there is no real competiton. Lastly, there is no direct government
intervention in a free market economy whereas there is in a planned
economy.

UNIT 4
1. What does macroeconomics study?
Macro is a branch of economics that studies the economic activity of an
entire country and economy wide-phenomena. It looks at overall economic
trends such as employment levels, economic growth, balance or payments,
inflation and so on, Therefore it provides ppl with a bird’s-eye view of
country’s economic landscape.

2. What are differences between microeconomics and macroeconomics?

There’re some differences between macro and micro. Firstly, micro studies
individual and business decisions while macro looks at higher up country
and government decisions. Secondly, micro focuses in supply and demand
and other forces that determine the price. On the other hand, macro centers
on economy-wide phenomena such as GDP, national income, inlation, ect…
Lastly, micro takes a bottom-up approach while macro takes a top-down
approach.

3. What are 2 branches of economics? What do they study?

Two main branches of economics are micro and macro. Micro studies the
actions of individuals and industries. Macro studies the economic activity of
an entire country and economy-wide phenomena.
UNIT 5
1. How do prices of a good influence its quantity demanded and quantity
supplied?
If the price of a good increases, the quantity dedmanded will decrease and
the quantity supplied will increase. On the other hand, if the price of a good
decreases, the quantity demanded will increase and the quantity supplied
will decrease.
2. What are shift-factors of demand? Analyzing one of shift-factors?
Shift-factors of demand are society’s income, prices of other goods,
expectations and tastes. For example, if society’s income is higher, ppl
(buyers) are willing and able to buy more at various prices. Therefore,
demand will increase and the demand curve will shift to the right. On the
other hand, if society’s income is lower, ppl are willing and able to buy less
at various prices. So demand will decrease and the demand curve will shift
to the left.
3. What are shift-factors of supply? Analyzing one of shift-factors?
Shift-factors of supply are prices of inputs, technology, taxes and suppliers’
expectations. For example, if prices of inputs are higher, producers are
willing and able to produce less at various prices. Therefore, supply will
decrease and the supply curve will shift to the left. On the other hand, if
prices of inputs are lower, producers are willing and able to produce more at
various prices. So supply will increase and the supply curve will shift to the
right.
4. What is the difference between demand and quantity demanded?
Demand refers to all the possible quantities of goods and services that
buyers are willing to buy at various prices while quantity demanded refers to
the particular quatity of a good or service that buyers are wlling and able to
buy at a certain price. In addition, demand is influenced by shift-factors
whereas quantity demanded is influenced by the price.
5. What is the difference between supply and quantity supplied?
Supply refers to all the possible quantities of goods and services that sellers
are willing and able to sell at various prices while quantity supplied refers to
the particular quantity of a good or service that sellers are willing and able to
sell at a certain price. In addition, supply is influenced by shift-factors
whereas quantity supplied is influenced by the price.
UNIT 6:
1. What are two types of funds from taxation?
Two types of funds from taxation are federal fund and trust fund. Federal
funds are general revenues which include income taxes and corporate
taxes and they can be used to finance the gorvernment in general. On the
other hand, trust funds which include payroll taxes can be used only to
pay for very specific programs such as Social Security and Medicare.

2. What is the federal debt/ public debt?

The federal debt is the sum of the debt held by the public plus the debt
held by federal account. In detail, debt held by the public is total amount
the gorvernment owes to all of its creditors in the general public. Debt
held by federal account is the amount of the money that Treasury has
borrowed from itself.

3. What are main sources of gorvenment revenue?

Main sources of gorvernment revenue are from taxation and borrowing.
Government revenue comes from many different kinds of taxes. Among
them, three main sources are individual income taxes, payroll taxes and
corporate income taxes. In addition, government revenue comes from
borrowing. Borrowing is mainly achieved through the issuing of bonds

UNIT 7
1. In what way (How) do government spending and taxation affect the
economy? Give examples?
Government spending and taxation directly affect the overall performance of
the economy. For example, if the government increases spending to build
new highway, the construction of the highway will create jobs. Jobs create
income that ppl spend on purchases, and the economy tends to grow. On the
other hand, when the government increases taxes, households and businesses
have less of their income to spend, they purchase fewer goods and the
economy tends to shrink.
2. What is deficit spending? How is deficit spending helpful or harmful for
the economy?
Deficit spending is spending funds obtained by borrowing or printing instead
of taxation. Deficit spending can be helpful for the economy when
unemployment is high or the economy is slowing down. On the other hand,
it can be harmful for economy when unemployment is low or the economy is
overheating.
• Helpful
Deficit spending is spending funds obtained by borrowing or printing
instead of taxation. Deficit spending can be helpful for the economy
when unemployment is high. For example, when unemployment is high,
the government can undertake projects that use workers who would
otherwise be idle. The economy will then expand because more money is
being pumped into it.
• Harmful
Deficit spending is spending funds obtained by borrowing or printing
instead of taxation. Deficit spending can be harmful for the economy
when unemployment is low. For example, when the unemployment is
low, a deficit spending may result in rising prices or inflation. The
additional government spending creates more compention for scarce
workers and resources and this inflates wages and prices

3. What is expansionary fiscal policy?

Fiscal policy is expansionary when taxation is reduces or public spending is
increase. Expansionary fiscal policy might occur when the economy is not
growing fast enough or unemployment is too high. Expansionary fiscal
policy is used to create jobs, increase demand, and develop the economy.

4. What is contractionary fiscal policy?

Fiscal policy is contractionary when taxation is increased or public spending
is reduced. Contractionary fiscal policy might occur when the economy is
growing too fast or inflation is too high. Contractionary fiscal policy is used
to restrict demand, control inflation and slow down the economy.

5. What factors should be considered in making decisions on the fiscal

policy?
 Factors considered in making decisions on the fiscal policy include inside
factors and outside factors. Inside factors consist of the level of economic
growth or unemployment likely in the future, whether or not to run a budget
deficit, and political considerations. Outside factors include fiscal policy of
other contries and the requirements of the IMF.

UNIT 8
1. What are funtions of taxation?
The primary function of taxation is to raise revenue to finance government
experdicture. Taxation also has other functions. Indirect excise duties can be
designed to dissuade ppl from consumming some kinds of products.
Taxation is also used by the government to encourage capital investment

2. What are ways (How) to avoid tax on salaries?

PPl avoid tax on salaries by some ways. Some employers give high-paid
empolyee lots of perks instead of taxable money to reduce income tax
ability. Individuals can postpone the payment of tax through life insurance
policies, pension plans and other investment, which are known as tax
shelters

3. What are ways (How) to avoid tax on profits?

Companies have variety ways of avoiding tax on profits. They can bring
forward capital expenditure so that at the end of year, all the profits have
been used up, which is known as a tax loss. Multinational companies often
set up their offices in countries where taxes are low. Somw criminal
organizations tend to pass money through a series of companies in very
complicated transactions to disguide its origin from tax inspectors and
police.

4. What are ways (How) to evade tax?

Ppl have some ways to avade tax. Self-employed ppl whose income is more
difficult to control than that of company undeclare their income. Lots of ppl
also undeclare their part-time job with small and medium-sized family firms.

UNIT 10:
 1. What does the insurance system operate? (= What is the operating
principal of insurance?
An insurance system collects premium from participants in the system. It
gives a promise that the insured will be compensated in the event of a loss. It
redistributes the costs of losses from the unfortunate few members to all the
members of the insurance pool.

2. What benefits does the insured receive from the insurance system?
When ppl take part in the insurance system, they receive some benefits. The
insured relieved of the uncertainty abt a loss. The insured are compensated
when the loss acually occurs. If no loss occurs during a year, the insured still
eliminate anxiety abt a loss.
UNIT 11:
1. Name functions of money? Analyze one of the functions?
Functions of money include a medium of exchange, a measure or a unit of
acount, a store of value and a standard of deferred payments. Money
functions as a store of value. As a store of value money is used to make
purchases in the future. This means that if we choose not to buy with our
money today, we can save it to buy in the future.

2. What are two type of money?

Two types of money are commodity money and token money. Commodity
money is a useful good serves as a medium of exchange. The value of
commodity money is abt equal to the value of the material contained in it.
Token money is a means of payment. Its value or purchasing power greatly
exceeds its cost of production.

3. What is the most important function of money? And why?

Medium of exchange is the most important function of money because of the
following reasons. Money as a medium of exchange makes the trading
process easier, quicker and more convenient. In addition, once money serves
as a medium of exchange, it also has other functions.
UNIT 12
1. What are three tools of monetary policy?
Three tools of monetary policy are the reserve requirement, the discount rate
and open market operations. The reserve requirement is the percentage the
Fed sets as the minimum amount of reserves as bank must have. The
discount rate is the rate of interest the Fed charges for those loans. Open
market opernations are the Fed’s buying and selling government securities.

2. What is expansionary monetary policy?

MP is expansionary when the money supply is increased. Expansionary MP
is used to increase the money supply by the lowering the reserve
requirements, dropping the discount rate, or buying more bonds.

3. What is restrictive monetary policy?

MP is restrictive when the money supply is decreased. Restractive MP might
occur when the economy is overheating. Restrictive MP is used to decrease
the money supply by raising reserve requirements, increasing the discount
rate, or selling bonds
UNIT 14
1. What is the concept and the functions of the Forex market?
The Forex market is the market in which national currencies are exchanged.
The foreign exchange market is an over-the-counter market, the primary
communication instruments being the telephone and the computer. The
foreign exchange market enables banks and international corporations to
trade foreign currencies in large amounts. The foreign exchange market
trades 24 hours a day.

2. What are participants in the Forex market?

Participants in the Forex market include customers (multinational
corporations), market makers (banks) and brokers (specialist companies).
Customers require foreign currencies for cross border trade or investment
business. Market makers quote buying and selling rate for currencies. They
earn profits from the difference between buying and selling rates. Brokers
act as intermediaries between banks. They contact the banks throughout the
 world to find the best dealing rate. They charge a commission for their
services.

3. What are two types of transactions?

UNIT 15:
1. What is the difference between Debt market and Equity market?
There are some differences between debt market and equity market. Firstly,
debt market is a financial market in which debt instruments (bonds or
mortgages) are traded while equity market is a financial in which equity
instruments (common stocks) are traded. Secondly, debt instruments are
short-term, intermidiate-term and long-term whereas equity instruments are
considered long-term securities. Lastly, debt holders receive predetermined
fixed interest rate. On the other hand, equity holders receive periodical
payments, call devidends.

2. What is the difference between Primary market and Secondary market?

There are some differences between primary market and secondary market.
Firstly, primary market is a financial market in which new securities are
issued and sold to initial buyers while secondare market is a financial market
in which previously issued securities are resold to investors. Secondly,
primary is not well kwon to the public whereas secondary market is well
known to the public. Lastly, the function of primary market is to raise funds
for issuing firms. On the other hand, secondary markets serve two important
functions: Making it easier and quicker to sell these financial instruments to
raise cash and determining the price of the security that the isssuing firm
sells in the primary market.

3. What is the difference between Money market and Capital market?

There are some differences between money market and capital market.
Firstly, money market is a financial market in which only short-term debt
instruments are traded while capital market is a financial market in which
longer term debt and equity intruments are traded. Secondly, money market
securities are usually more widelt traded and more liquid whereas capital
market securities are less liquid. Lastly, short-term securities have smaller
 fluctuations in prices and make them safer investments than long-term
securities.

4. What are the advantages and disadvantages of owning a corporation’s

equity?
The advantage of owning a corporation’s equity is that equity holders benefit
directly from any increases in the corporation’s profitability or asset value.
In addition, equity holders have the right to vote on issues important to the
firm and to ellect its directors. However, equity holders are residual
claimants.