FINANCIAL SERVICES THEMES

Financial Services Themes

Financial Services Themes

Introduction

This report explores the four key financial services themes, namely government, money markets, personal finance, and risk through the programme. Further, this report discusses the relevance of each theme to the financial services industry. Each aspect is explained of the given themes in terms of financial services.

Discussion

Government

Operating and Capital Budgets

State and local governments report operating budgets and capital budgets. Generally, operating budget is an enumeration of (a) spending on present operations and (b) in flows of revenue that are essential to finance those operations (current operations take place each period). To clarify, spending on recent operations, including purchases of tangible items and services, such as non-storable goods like salaries of employees (www.healthlink.org).

Capital budgets enumerate (a) planned spending on repairs and purchases of capital assets and (b) to finance the capital asset. In contrast to current operations, capital assets are used for many periods (examples are school buildings, roads, etc). These services are financed with borrowed funds. Governments borrow by selling bonds, which are repaid over many periods, when the services produced by capital are enjoyed. A legal obligation requiring future expenditures is a financial liability. Thus, a capital budget is an enumeration of expenditures on capital assets and newly incurred liabilities in a given period. In contrast to most state and local governments, the federal government does not report a capital budget.

Fiscal Policy

Fiscal policy refers to the UK government's uses of tax and expenditure policies to control the nation. When the expenditure of government is increased for the purpose of defense or increases tax rates of personal income tax, it has an effect on the spending level in the economy and, hence, will affect the activities at macroeconomic level of a country measured by such factors as gross domestic product (GDP), employment, and inflation. This is true for almost any change in spending or taxes. Any change in government taxes or expenditures may affect the budget deficit. A decrease (increase) in expenditure or a increase (decrease) in tax will decrease (increase) the budget deficit of government. To finance the deficits, the Government may borrow by selling bonds. Any decrease or increase in the government deficits will have an effect on the market of funds that are loan able and interest rates, such as (dept GREEK crises 2012) which then feeds back on employment and inflation.

Economists categorize government spending in two types. First, there are government purchases of goods and services. Government purchases of food, military goods, and other goods needed for consumption purchases, as well as purchases of investment goods, such as buildings and the building of bridges, are included. On the other hand, the government also spends on social insurance programs, such as Food Stamps and Medicare, which are primarily transfers of income from taxpayers to needy citizens. These are referred to as transfer payments (Horton and El-Ganainy, 2009).

Money Market

The money market is an element of financial market where government, financial institutions, national treasuries, central banks, commercial banks, fund managers, insurers, and ...