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Macroeconomic Variables Affecting Citigroup Incorporated - Research Paper Example

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The interest rate implies the cost of capital borrowers are expected to pay for the capital credit provided (Khemraj, 2014). Accordingly, the…
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Macroeconomic Variables Affecting Citigroup Incorporated
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Download file to see previous pages In contrast, a lower interest rate has the effect of increasing the demand of the credit services provided by the bank because it reduces the cost of acquiring the loan (Vaish, 2012). Another factor that determines the demand of the credit services provided by Citigroup Corporation is the gross domestic production (GDP) growth. The gross domestic production implies the total production experienced in the general economy of a country. The GDP affects the demand of the credit services offered by Citigroup Corporation because it determines the interest of the customers to seek a financial loan. If the GDP growth is high and increasing, it implies the income generation of the individuals is increasing. Consequently, the demand of the credit services offered by Citigroup will increase since more investors will be willing to borrow the loan because investing opportunities are increasing. In contrast, when the GDP is declining the demand of the credit services offered by the company reduces. The demand of the credit services decreases during recession period because the investing opportunities are decreasing for investors to borrow.
Per capital income is another macro-economic variable that affects the supply of the credit services offered by the company. The per capita income implies the average income a country’s population earns (Sargent, 2009). Accordingly, the per capital income variable affects the supply of the credit services provided by Citigroup because it determines the deposit customers are willing to deposit in a given period. If the per capita income is high, the volume of customers deposits increases enhancing the ability of the company to supply the credit services in the market. In contrast, the supply of the credit services offered by the bank reduces when the per capita income of the population decreases because the volume of customer deposits will be lower. Similarly, the unemployment rate is another macro-economic ...Download file to see next pagesRead More
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