A perennial debate is whether federal budget deficits lead to higher interest rates. The follow-ing table gives some historical data on deficits and interest rates. For each year, the deficit is the difference between revenues and expenditures measured in current dollars; a negative figure is a deficit, and a positive figure is a surplus.

On the basis of these data, what inference could you make about the relationship between federal deficits and interest rates? Explain why inferences based on these data alone might be problematic.

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Year Deficit Interest Rate 1980 1985 1990 1995 2000 2005 2010 $-73.8 -212.3 -221.0 -164.0 236.2 -318.3 1,293.5 15.3% 9.9 10.0 8.8 9.2 6.2 3.3