Question

Describe two to three macroeconomic factors that influence interest rates in general. Explain the effects of each factor on interest rates. Now think about the industry in which you are employed or one in which you have past experience. To what macroeconomic factors is your industry most sensitive? Describe two contemporary factors that seem to be impacting your industry today, and identify their impacts on the interest rates experienced within your chosen industry.

Answer 1

1 The Factors that influences the interest rates are:-

1. Inflationary Pressure

The inflationary Pressure affects the interest rates because the rates paid on most of the loans are fixed in the loan contract. A lender money is reluctant to lend money when the purcahsing power of the money is less at the time of the mending. The lender will demand a higher interest rtae. Therefore we can say that the inflationary pressure affects the interest rates.

2. The action of Federal Government

The action of Federal Government plays a great role in affecting the interest rates. The reason being that it is the nations largest borrower. It has the highest credit ratng and debt therefore affcts the interest rates.

2. Iam currently employed in Information Technology and Services Industry. The macroeconomic factors that can impact any industry are as follows:

1. Unemployment
2. Savings
3. Inflation
4. Investments

As Information Technology is considered a high paying industry, Inflation will be the most senstitive factor that affects this industry directly. Inflation will cause further increase in salary and if the industry is currently facing a down turn then the salary factor will disturb the employment index.

3. Contemporary factors are those factors that affect the industry in the present scenario. The contemporary factors that affect the Information technology right now are as follows:

1. Globalization
2. International Conflict

Globalization is one factor that affects the interest rate directly. Globalization causes foreign currency to enter and leave the market. Many outsourcing and offshoring are enhanced due to globalization. Hence when foreign currency enters the economy, the economy will get more stablized and this will cause the interest rates to get altered based on the current economic condition.

International conflict will also affect the trade between nations. When there are international conflicts, the barriers might disrupt the trade between two nations, which will affect the currency exchange between nations. Hence International Conflict is a major contemporary factor that affects the Information technology industry.