Sarah owns a hair styling salon. She needs to update her shop with new customer chairs and work stations. If the Fed were to lower interest rates by 1.5 percentage points, at the same time that the government increased the tax rate by 1.5%, she could immediately determine that updating her shop would not increase or decrease her financial position.

Question

Quizplus · Accepted Answer

The decrease in interest rates would make it easier for Sarah to borrow money to pay for the updates, but the increase in tax rates would decrease her net income. Therefore, her financial position would be decreased overall.

Sarah Owns a Hair Styling Salon