| The influence of government activity to interest rate
Economic entities are not only individuals and companies. Government is
also important economic entity. Government gets activity funds by tax and
issue of bond, and offers various kinds of services and public goods. Therefore,
government activities influence GDP (Gross domestic product). It means
government activities influence interest rate. Therefore, influence of
government should be considered in order to define interest rate correctly.
But if government and companies are separated, it becomes complicated
to think of interest rate. Therefore, government is estimated as a part
of companies. It is easy way to grasp the essence of interest rate. Each
company pay costs of taxes and spread government activities as a business
of their own. Then, there is no difference between activities of companies
and activities of nation. Therefore, the conclusion
[Interest rate on loans must correspond to economic growth rate completely.]
is applicable without change.
As discussed above, it is concluded that economic growth rate should be applied to interest rates of national bond and local bond.
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