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Inflation and Interest Rates in Economic Policy
The key factor in the current economic situation is the inflation rate, which has not been significantly impacted by quantitative easing. Putting liquidity into the hands of the general public can lead to inflation in the basket of goods measured. If inflation rises substantially, the traditional approach of raising interest rates might not be feasible due to the high national debt. With excessive debt, raising interest rates could bankrupt the government and hinder the rolling over of debt, posing a dilemma on how to combat inflation.