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.
Level of Learning 3: Application of principles

Question

Quizplus · Accepted Answer

Lowering interest rates would make it cheaper for Sarah to borrow money to update her shop, but increasing taxes would decrease her disposable income. Therefore, these opposing economic changes would not cancel each other out and would likely affect her financial position.

Sarah Owns a Hair Styling Salon