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CHAPTER 1: OVERVIEW ABOUT MACROECONOMICS

A. Economics: way, scarce sources – allocate – alternative uses- human needs
Human needs: unlimited
Resources: Limited
>>TRADE- OFF
B. How people make decision?
1. Compare MB and MC
MB: Marginal(cậ n biên) Benefit: The amount of utility/ benefit increases when you
take one more action
MC: Marginal Cost: The amount of cost increases when you take one more action
MB>MC of one action: Do
MB<MC of one action: Don’t
2. Opportunity cost: The value of the best alternative for one action
OC is high>> Don’t
OC is low>> Do
Example 1: MB vs MC
Expected total Revenue: 4 million
Expected total Cost: 2,5 million
Spend 1,5 out of 2,5 million of cost to buy flower and SOLD.
But THERE ARE MORE SELLERS>> CONTINUE TO SELL, the revenue of the rest
flowers is only 1,5 million
>> Should CONTINUE TO SELL OR NOT?
Example 2: Opportunity cost
True/False: If the government wants to control the population of its country, the
government can increase the Opportunity cost of giving birth of women
True/False: you have a house: If you let A rent the house, you will receive a payment
of 10 million, if you let B rent the house, you will receive a payment of 5 million. OC
of staying in the house is 15 million
C. Division: 2 (Roles and Subfields)
1. Roles: Positive vs Normative
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Positive Normative
Scientists Policy advisors
What is happening? What What SHOULD/NEED to be done?
Happened
Facts Advisory
2. Subfields: Macroeconomics vs Microeconomics
Macro Micro
Overview More detailed
The whole economy of a country, a Focus on behaviors of 3 “actors” of
region, the world Economy: households, firms,
governments
A basket of goods, The Price Index Can: separated goods, price of each good
Unemployment rate, Economic growth
rate, interest rate, Inflation rate
D. 3 questions and 3 types
3 Questions: Produce: What, How, To Whom
3 Types
Command: Governments ANSWER/ DECIDE ALL 3 questions
Market: NO government intervention: Only Households, firms answer: To Whom,
Firms answer: What+ How
Invisible hand: Adam Smith, >> PRICE IS the factor that drives the behaviors of firms
and households
Mixed: Governments, Households, Firms answer 3 questions TOGETHER. Firms and
households interact first, if market failures emerge>> Governments intervene to
stabilize
Command+ Mixed: Models have GOVERNMENT: Visible hand: Kenyes
E. 3 Economics Models
1. Supply and Demand:
Exogenous: outside, cannot see in the model>> Shift (increase: Right, decrease: Left)
Edogenous: inside, can see in the model>> Move along a curve
2. Circular Flow Diagram: 2 actors: Firms+ Households, 2 markets: Goods,
Services and Factors of Production, 2 REVERSED FLOWS: Money and
tangible+ intangible goods
>> Income=Expenditure : from Households aspect
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3. PPF: Production Possibility Frontier

2 goods, 1 economy produces, given resources and technology
Meaning of PPF:
Trade off: OC when producing one more unit of X or Y>> PPF slopes down
(increase X then decrease Y and vice visa)
Efficiency: On PPF: Possible+ Efficient: all resources are utilized, below (on the
left handed side): Possible+ Inefficient, Above (on right handed side): impossible
(lack of resources)
Unemployment rate: Below> ON PPF (natural unemployment rate) > Above

CHAPTER 2: GDP, GNP, CPI

A. GDP
1. DEFINITION: ALL, MARKET VALUE, FINISHED GOODS, WITHIN A
COUNTRY, GIVEN PERIOD OF TIME
 All: exclude self-supply and illegal
 Market value: exclude value on UNDERGROUND market (posted price)
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 Final: exclude INTERMEDIATE goods (EXCEPT: INTERMEDIATE goods

FOR EXPORTING AND INTERMEDIATE GOODS FOR EXPORTING IN
INVENTORY)
 Within a country: GDP on country –only count for products produced in
the territory of that country
 Produced + Given in a period of time: produce in which year>>count for
that year only (EXCLUDE: RESALES)
2. 3 APPROACHES: Expenditure (production), Income, Value added
1. Expenditure: GDP =C +I +G+NX
C: Consumption
HOUSEHOLDS: daily consumption for living,
Note: renters: rental payments: included in C, home owners who use house for
renting: imputed value of the house (furniture, decoration, repair of goods in the
house: included in C)
Exclude Households buy NEW HOUSE
I: Investment (total)
 Business: Inventory: PRODUCED but not SOLD YET and NEW plants and
equipment
 Households: BUY NEW HOUSES
Investment of Macro vs General Investment
 Investment in the formula of GDP: TOTAL INVESTMENT = NET
INVESTMENT+ DEPRECIATION
 Investment of Macro HAS to create Goods and services for market
 >> Stocks, bonds are not considered as an investment in marco but only
SAVINGS
STOCKS VS BONDS
 Stocks: ownership (equity), often depends on profit
 Bonds: debt , not depend on profit
HIGH RISK, HIGH RETURN
>> The yield (interest rate of stocks or bonds) depends on the risk that it has
EX: True/False: The interest rate of Government bonds is higher than that
of companies’ stocks
G: Government spending (expenditure)
 Governments spend for goods and services
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 Exclude TRANSFER PAYMENT : unemployment doll, pension, interest

payment for bonds
NX: Net Export= Export – Import
EX: True/False: The price of IMPORTED SHOES decrease, GDP will increase
2. Income : GDP =w+i+r+Pr+Ti+De
 W: wage
 I: Interest rate
 R: rental payment
 Pr: Profit = TR-TC
 Ti: Indirect tax (VAT)
 De: Depreciation value
3. Value added: Sum of VA of all businesses in an economy
VA= value of production – value of intermediate goods bought from others
3.GDP nominal vs GDP real
GDP nominal: current price>> show difference in both Price and Ouput
k
GDP =∑ Pti . Qti
t
n
i=1

GDP real: base year price>> Difference in GDPr>> Difference in output of

economy
k
GDPtr =∑ Pbaseyear
i . Qti
i=1

GDP Deflator: Dgdp: Price index

t
t GDPn
D GDP = t
× 100
GDP r

Inflation rate:
t t−1
t DGDP −DGDP
π= t−1
×100
D GDP

4.Ecomomic performance of a country via GDP

 GDPr per capita: living standard

 GDPppp (purchase power): most exactly
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B. GNP
1. DEFINITION: ALL, Market value, finished goods, people of one country,
given a period of time
GDP vs GNP
GNP= GDP + value of G&S produced by people of one country in other country –
value of G&S produced by people of other country in one country
=GDP+NFA
Ex: True/False: NFA is always higher than 0
Ex: The salary of Vietnamese people working and living in the US can be counted
in ……….
GNP vs GDP
GNP GDP
Geographical No Yes
limit
Personality limit Yes No
Other formula:
NNP=GNP-De
NI=NNP-Ti
Yd=Y-Tax+subsidies
C. CPI
Consumer Price Index
Definition: basket – typical consumer>> Cost of living
How to calculate
 Fix the basket (find the goods + services in the basket)
 Find the prices of the goods and services in the basket
 Calculate the Cost of the basket in current year and the cost of basket in Base
year
 Calculate CPI: CPI = Cost of the basket in current year/ cost of basket in Base
year x 100 (no unit)
 Inflation rate:
t t −1
t CPI −CPI
π= t −1
×100
CPI
Dgdp vs CPI
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Dgdp CPI
Products for firms: v x
Luxirious v x
basket Flexible depending on Fixed
years
Importing products x v

True/false: there are 2 indexs to calculate inflation rate

Why CPI is often overstated?
 Substitution: some goods have prices increased with quicker speed than
others>> consumers adjust their behaviors, but the basket is fixed (chicken
for pork, beef for pork)
 Introduction of new goods: increase variety and choices>> real value of
money increases, but the basket doesn’t count this (Netflix)
 Unmeasured Quality change of the goods and services in the basket: quality of
goods changes>> the real value of money changes >> but the basket doesn’t
count (the upgraded software with the same price)
Practice
Multiple choice

If the adjustment index of GDP increases while real GDP decreases, in this case, nominal
GDP will:
A. Increase
B. Decrease
C. Not change
D. Cannot be concluded
CPI in 2014 is 108, and in 2015 it is 115. In that case:
A. The inflation rate in 2014 is 8%, and in 2015 it is 15%
B. The inflation rate in 2014 is 8%, and in 2015 it is 6.5%
C. Not enough information to calculate the inflation rate in 2014, while the inflation rate in
2015 is 6.5%
D. Not enough information to calculate the inflation rates in both 2014 and 2015
A country experiences a trade surplus when:
A. Exports exceed imports
B. Imports equal exports
C. Imports exceed exports
D. Imports equal 0
If the real GDP of country A is 65% of the real GDP of country B, and the growth rate of
real GDP of country A is 4%, while that of country B is 2.5%. Then, after 15 years, what
percentage of country B's real GDP will country A's GDP be?
A. 80.8%
B. 75.2%
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C. 74.5%
D. 77.8%
What is considered as investment in GDP?
A. Buying government bonds
B. Buying corporate stocks
C. Buying a new car
D. Buying a new house
Which statement is correct?
A. Countries with different GDP per capita often have similar growth rates
B. The unemployment rate is calculated by the percentage of unemployed people divided by
the labor force
C. The unemployed include those in the labor force with jobs and those who do not want to
work
D. GDP per capita and growth rates vary significantly among countries over time, with poor
countries becoming relatively richer.

True false
 Nominal GDP could reflect the change of total output over years(False).
 Price of imported shoes (in typical consumer basket) increases will make
both GDP and CPI increase(false)
 Price of the buses and machines for production increase will make CPI
increases (false)
 In 2014, A bought a second hand car produced in 2013 at price of 20000
USD, to buy this car A had to pay a commission of 100 USD. GDP 2014
increased 20100 USD
 Dgdp increases while GDPr decreases, GDPn will increases
Dgdp=GDPn/GDPr x100
 Use this table:
Suggestion:
 GDPn2020
 GDPr2020
 GDPn2021
 GDPr2021 >> Dgdp 2020, Dgdp2021

Year P of rice Q of rice P of cloth Q of P of Q of

cloth bus bus
2020 20 5 10 15 4000 3
2021 50 8 12 25 4500 6
 A VN households buys a car of Honda (Japan) produced in Thailand. How this
activity affects GDP, GNP of Thailand, Vietnam, Japan?
 A CEO has just been fired, he now receives an employment doll of 50 million
VND, instead of 150 million VND/month. His wife after his fire/sack, she
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starts to work instead of taking care of household chores at home and

receives a salary of 10 million/month. How this activity affects GDP?
 Gross domestic product measured in terms of prices of a current year is
 Ad curve shifts to the left when tax/ government spending ….
 Dgdp in 2020 is 120, Dgdp 2019 is 110. The rate of inflation in 2020/2019 is
 GDP=6000, NX=30, I=740, G=1090, C=?
 The calculation of GDP excludes the value of : a family member doing
household chores, a car produced in a foreign country, purchases new tires to
be installed on new vehicles
 Consider an economy that only produces 2 goods: books and pens. Last year,
100 books were sold at 20 dollars each, and 50 pens were sold at 5 dollars
each, while this year 150 books were sold at 25 dollars each, and 40 pens
were sold at 6 dollars each. Real GDP for this year with the base year being
last year is
 GDPn =20 billion, Dgdp=50, GDPr=?
 Investment of GDP includes the purchase of households of used homes

Calculation
 Assuming that a country X produces these goods and sells them with price as
below:
Year Pizza Smartphone Clothing
Quantit Price Quantity Pric Quantity Price
y e
2013 50 5 20 15 5 20
2014 55 7 23 16 6 22
2015 60 8 26 18 8 23
The consumption goods basket: 40 pizza, 25 clothing, Base year: 2013
a. Using a method similar to the CPI, calculate inflation rate in 2014, 2015
b. Using a method similar to Dgdp, calculate inflation rate in 2014, 2015
c. Is the inflation rate in 2015 (computed by Dgdp) the same as that calculated
by CPI? Explain why or why not?
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ECONOMIC GROWTH
1. Formular: gpct=
2. Resources for economic growth/fuels for economic growth
 H/L: human resources: including labour and the quality of labour
 K: capital
 N: natural resources
 T: technology
3. Theories about economic growth
a. Classical theory of Smith và Malthus: Importance of natural resources
especially the LAND
b. Keynes (Harrod-Domar): Capital accumulation, important role of savings
and investment
c. (Robert Solow): Intensive investment, for long term growth needs
TECHNOLOGY
 Catch-up effect: diminishing return theory
 Technology advance: helps for long-term economic growth
 Rule 70: A, growth rate of A: g%, then to turn A into 2A the time needed is t=
70/g
CHAPTER 6: AD, AS
A. AD: aggregate demand
AD=C+I+G+NX
1. AD: slopes down : P increases>.AD decreases and vice visa
2. Factors that make AD shift
Policies
 Fiscal policy: Government: Tax, Government spending (or subsidies)
 Monetary policy: Central Bank: 3 tools (in chapter Money and Monetary
Tools)
 Fiscal or Monetary Policies ONLY AFFECT AD CURVE
 Policies to increases AD >> AD shifts right and vice visa
Demand shocks (include but not limited)
 Shocks on Stock market
 Economic downturn>> decreases in Consumption, Investment
 Covid 19>> disruption in Global supply chain
---------
B. AS
1. Long term AS: LRAS, does not depend on Price
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LRAS: depends on Technology, Human Resources, Natural Resources, Labour,

Capital
These factors change>> LRAS shifts to the right if potential yield increases and vice
visa
2. What factors make SRAS shift? (include but not limited)
 Prices of input for productions
 Tax levied on production or businesses
 Future price (expected price)
 Recession
 Disruption in GSC
C. STEPS to create the model
Step 1: Analyse to know the situation will affect AD, or SRAS
Step 2: let AD or SRAS shift
Step 3: Find new equilibrium in short term
When the government increases taxes on imported consumer goods:
a. The aggregate demand curve shifts to the right
b. The aggregate demand curve shifts to the left
c. The aggregate supply curve shifts to the right
d. The aggregate supply curve shifts to the left
e. Both the aggregate supply and aggregate demand curves shift to the right
In the short run, a decrease in input prices will:
a. Increase aggregate demand and increase the overall price level
b. Decrease aggregate demand and increase the overall price level
c. Increase short-run aggregate supply and decrease the overall price level
d. Increase short-run aggregate supply and increase the overall price level
e. Decrease short-run aggregate supply and decrease the overall price level
According to the Rule of 70, if the real GDP of a country grows at a rate of 5% per year,
approximately how many years will it take for the real GDP of this country to double?
a. 5 years
b. 14 years
c. 20 years
d. 35 years
e. 40 years
The living standards of a population in a country can be reflected by the indicator
a. Nominal GDP per capita
b. Real GDP
c. Real GDP per capita
d. Nominal GDP
e. Consumer Price Index (CPI)
If the price of oranges rises, causing consumers to buy fewer oranges and more apples, the
calculation of CPI will be
a. Substitution bias
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b. New product bias

If nominal GDP increases by 11%, real GDP increases by 4%, the inflation rate is:
a. -7%
b. 7%
c. 8%
d. 11%
e. 5%
The phenomenon of stagflation is created by
a. An increase in aggregate demand
b. A decrease in aggregate demand
c. An increase in aggregate supply
d. A decrease in aggregate supply
e. An increase in the money supply
The progress of science and technology will
a. Shift the aggregate demand curve to the right
b. Shift the aggregate demand curve to the left
c. Shift the short-run aggregate supply curve to the left
d. Shift the long-run aggregate supply curve to the right
e. Shift the long-run aggregate supply curve to the left
Assuming the nominal interest rate is 10%, the expected inflation rate is 5%, the real
interest rate is:
a. 5%
b. 2%
c. 5%
d. 10%
e. 15%
Which of the following will most likely stimulate economic growth the most?
a. Increase in household consumption
b. Reduction in corporate taxes
c. Increase in the natural unemployment rate
d. Larger trade deficit
e. Increase in interest rates
If in a year, the government collects more money than it spends, then
a. Trade balance surplus
b. Budget balance surplus
c. Budget balance deficit
d. Trade balance deficit
e. None of the above
Assuming the economy is experiencing a recessionary gap, which fiscal policy is appropriate,
and what is the impact of the policy on the economy:
Fiscal Policy Output Unemployment
A Increase taxes Increase Decrease
B Decrease spending Decrease Increase
C Decrease taxes Increase Increase
D Increase money supply Increase Decrease
E Decrease taxes Increase Decrease
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