Diploma of Accounting: 1333187

Question 3

1. Define the following terms

1. Monetary policy- It is a policy or action which is undertaken by the country’s main bank or the central bank in coordination and control of the government. It actually deals with the a system where the influence and the working is done over the money segment. It analyze and helps in stimulating in terms with the money is in the economy, in a much organized manner it assists in defining the outflow which being the costs along with the borrow money and at same time defines the inflow which being the revenue (Walsh, 2017).  On account of the UK’s central bank, two main tools are the  interest rate which is also called the Bank Rate and the other being the as asset purchase or quantitative easing .

• Balance of payments –  This segment defines the or actually records the transactions as well as the trade transactions for the rest of world. In actual analysis it is essential to understand that the Balance of payments is mainly divided into three perspectives which being the current account which Totals – Trade Value of Goods and Services adding Investment income adding any transfers done in.  The second being the Capital Account which deals with managing the flow in terms with the capital value, along with the investment value and the portfolio investment value. The last being the element in terms with the errors and omission which helps in reducing the collected data and the missed out elements. On the more, it is evident that the balance means the balance is done for the international payments in relation to the economic transactions related to the particular and a given accounting period.           

• Capital control –  It is a aspect where the control needs to established on the financial flow in terms with the capital market. It helps in managing the capital which is received within the domestic and as well outside the country.  It is necessary to understand that the controls laid will be for the economic wide as well as the it can be for a particular country as well as the sector or will be in terms with industry. The capital control is managed in connection with the monetary policy. The Capital Control includes the transactions taxes limits , prohibitions outright along with reviewing the governments flow and the regulation income. Controls can be tight, medium or the easy (Walsh, 2017). The tight controls usually occur in case of under developed countries, or developing countries. Whereas, the medium and the easy controls work in the developed countries. Especially on account of the UK policy this type of concept is actually unknown or stated in other terms it is very easy or lien tent. In real sense the UK has very less restrictions in terms with the analyzing the capital and its movement from one place to the other along with the imposition and the improbable eventualities.

Question  3B

 It is a concept which is used to perform economic decisions which help in making theory which actually helps in understanding that the concept of the impossible trinity in the economic system. The strategies which act like a option or a saver are listed as follows:-

1. Setting a fixed currency exchange rate
2. Allowing capital to flow freely with no fixed currency exchange rate agreement
3. Autonomous monetary policy                        

In terms with the fixed exchange rate the best part is that the capital mobility is implied which deals with gaining and dealing with the concept of autonomy and the monetary regain. It deals with reduction of the in stability and the risk factor and at the same time assures that the vertex and the policy configuration is managed in a right manner. It somewhere helps in achieving the independence in terms with monetary stability. It some where avoids the aspect of domestic interest rates which assures the capital fight are minimized and at the same time international reserves and GDP is rightly and correctly maintained the fixed exchange rate actually saves the country from both segment one being the inflation factor and the other being the deflation factor. This set of strategy actually relaxes or ease the trilemma and eventually leads to holding of the reserves segments.

The other strategy being the Allowing capital to flow freely with no fixed currency exchange rate agreement – This aspect majorly deals with a segment where the capital is flowed freely on account of the investment which is based on the foreign investment and the domestic boundaries. In this is a aspect where the restrictions are posted only in a manner when the inflation rate s not high and eventually does not effect the overall working of the estimates and the Allowing capital to flow freely with no fixed currency exchange rate agreement transportation of the parity and the interest rate are correctly estimated and computed to assure that the estimation and the currency management is processed in a right it may help in avoiding the capital in connection with the international reserve holding and stability in terms rate management.

 Autonomous monetary policy is a process which deals with the reflection of the country central bank independence and the supply of the control money supply prospects. This system will develop a flow where the money supply will lead to a position where the interest rate will raise the rising interest rates. This policy is used to assure that the extra push and punch the environment which will lead to provide an segment of the autonomy along with the independency and the exchange rate policy movement. In terms with the credibility and the semi fixed  and semi floating elements will lead to provide a process system which will definitely lead to control the concept of performance of the economy in a domestic front which will eventually lead to control the fiscal policy in a much controlled and a prudent manner which may actually support the growth supply rate and devaluation of the currency.       

Question 4 A)

The credit rating agencies have definitely a great role to play in terms with streamlining the  credit rating agencies deals with the providing the assessments in connection with the corporations as well as the packagers which are backed with the assets backed securities. In terms with the credit worthiness it deals with the aspect of credit bureaus along with the other financial institutes. The Rating of the agencies will lead to assess the credit risk factor for the specific debt securities along with the factor of the borrowing organization segments (Sangiorgi, and Spatt, 2017). In connection with the bond market, a system where the agency deals with the rating which may provide the aspect of the agency evaluation and will definitely lead to provide a system where the evaluation and monitoring is done in terms with the creditworthiness of not only the borrowed securities of debt but also the securities which are issued by the government along with the various corporations and capital market analysis.      

It is a concept where the ratings are structured in financing transactions where the fiancé help in managing the collateralized debt obligation and deals with the pool security of the rate structure financial product ranges.  On the more, this segment helps the government to assure that it deals with nullifying the proposed structure of tranches and will surely lead to attain the rate in terms with the investors margins and returns and how the same is dealing with the benefits which will surely lead to support the government as well as the world bank and the International Monetary fund .

        It is a know fact that the causes of the financial crisis mainly depends on the credit rating agencies as well. In real term analysis when the financial crisis led to a condition which came into negative lime light according to the investigators along with the economists as well as the journalists. The credit agencies causes are mentioned in the Financial Crisis Inquiry Report (FCIR), that stated the three big failures in terms with the credit agencies where the essential cogs which further, led to a position of the financial destruction and later led to add on the melt down of the key enablers. As a matter of fact, it increased the burden of the interest rates and led to a margin of adding the concept of inflation in connection with the capital adequacy It actually built a further pressure on the lenders to pay back the money and at the same time the interest value there by, increasing the debt difference more. Actually , the complex system of debt pool management led to a condition where the issuers and the investors of securities led to a major set back on account of the mortgage. On the more, the credit default swaps will lead to a position where the securities led to a further let down in terms with estimation of bad regulation and polices along with a complete failure of the sublime securities and financial policies.

Question 4 b)

State Aid hold lot of importance and weight age as it provides a great level of financial support to the organization for both short level duration as well as the higher level of duration. It will lead to assure a proper balance between the community and the sector which leads build harmony and avoid any form of unnecessary inflation and financial distress in the market. Further, it helps in supporting the managing of the important projects as well as the European project for the general up lift ment of the country and environment. On the more, it helps in avoiding or minimizing the distortions minimizing the cost bear for the taxpayers as well.

There are various types of state aid which can be as follows:-

1. Rescue Aid – It is mainly given in form of direct state grants which is given at the time urgent need as well as when the state is facing the liquidity problem and major shortage problems (Bacon, 2017).
2. The other aid can be in terms with tax or other social security exemptions which deals with providing a relief in terms with the tax rate and the other allied deposits in terms with the social charges. Thus, providing more saving in hands of the public.
3. The other aid is on account which is giving to the company and the business organization of various forms which may be in terms with the preferential interest rates which being actually giving a lower rate as compared to earlier times.
4. Preferential Grants or loans will deal to assure that the concept is well managed and the loans will be given on the preferential manner.      
5. Further, the issues will be on account where the disposals are based on the land and buildings and the market value which being the disposal in terms with the building at less than full market value. It provides a segment where the aid can be in terms with the debt of write –offs.  
6. The other grants will also include the concept of benefit in terms with the disposal of land or buildings at less than full market value which will surely help to circulate money and the lead to provide a lower level of the assistance and the waiving off the public funds and return value (Bacon, 2017).
7. The other aid include in terms with the export assistance and also leads to provide a incentive in terms with the import assistance where the subsidy is given to attain that the export is reduced and the forgiveness is nullified and liabilities and the burden of payment and the investment is based on the region analysis.

Thus, the state aid can be in various format which may be a lump sum deposits or the rate reduction. It can be in terms of barter system as well or in connection  with the percentage and also can be in form of guarantees and indemnities.

References

Bacon, K., 2017. European Union law of state aid. Oxford University Press.

Sangiorgi, F. and Spatt, C.S., 2017. The economics of credit rating agencies. Foundations and Trends in Finance, 12, pp.1-116.

Walsh, C.E., 2017. Monetary theory and policy. MIT press.