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What was the interest rate during the carter administration?
18.5%
What president had the highest tax rate?
reagan
When the government runs a continual budget deficit what does it increase?
interest rate
Explain Keynesian Economics and how did the US put this theory into effect?
During the 80's the massive tax cuts in the U.S lead to a rise in interest rate and have no effect on private savings as opposed to what the neo classical economics have predicted.
Who creates the caps on government borrowing?
In the USA it is Congress. They have to pass legislation to authorize the government to borrow more money (raise the debt ceiling). Indirectly the Federal Reserve and the market also put a cap on it since the ability to borrow depends on the interest rate that must be paid on any bonds issued by the government. Higher interest rates set by the Fed cause the interest rates that must be paid on government bonds to have to be higher to actually sell. The market also determines what interest rate will be required to sell all the bonds - the less demand there is for the bonds, the higher the interest rate has to be in order to make them attractive enough to sell and the better the yields on other potential investments, the higher the interest rates have to be in order to be sufficiently competitive. The higher the interest rates, the more difficult it is to get approval to borrow.
