Lance owns Lance Lawns Irrigation Systems, LLC, a company that installs and maintains underground lawn irrigation systems. Business is down due to new housing starts being negatively impacted by a deep recession. To make things worse, his bank called yesterday to inform him that his credit limit (interest fee of 12.5%) will be cut from $30,000 per year to $15,000 per year, unless he is willing to pay a higher interest rate of 20%. As Lance drives to the first job this morning, he knows that his last task of the day will be to reduce the hours for his two employees. He can't afford to work employees eight hours per day, with only a $15,000 line of credit. Which of the following strategies will help Lance's situation?

Question

Quizplus · Accepted Answer

If the Fed decreases interest rates, it will make it easier for Lance to obtain loans at a lower interest rate, which will help him expand his business and potentially hire more employees. It will also make it more manageable for him to pay off his current debt and credit line, easing the financial burden on his company. The increase in government spending (choice A) may be helpful for the overall economy, but it may not directly benefit Lance's business. Decreasing government spending (choice B) could further hurt the economy and potentially make it harder for Lance to obtain funding. Increasing the federal funds rate (choice D) would make it more difficult and expensive for Lance to obtain funding and could further hinder his ability to expand his business.

Lance Owns Lance Lawns Irrigation Systems, LLC, a Company That