How does government borrowing drive up interest rates, and why does it impact things like my car loan or mortgage?
Classroom Scenario: Economics 101 Discussion on U.S. Government Debt and Credit Downgrade Key question to discuss: How does government borrowing increase interest rates for private borrowers, and why does it affect things like my car loan? Why does the recent Moody’s downgrade of the credit rating to Aa1 signal higher risk? Why would my taxes go up in the future because of what the government is spending now? Why does a weaker dollar cause inflation, and how does that impact someone like a student and other people who are just trying to pay for groceries? Are there other economists’ perspectives that tackle the issues with different strategies? Setting: A university lecture hall, Economics 101 class, with Professors Sanchez and Carter co-teaching. The class has just finished discussing the article by Thomas Savidge on the U.S. government’s credit downgrade by Moody’s and its economic implications. Three students raised their hands to ask questions about the article’s ...
