Question

when the fed raises rates, is this a good sign for businesses? (1 point) no, it lowers purchasing power. yes, any increase is great news. yes, it means inflation is very low. no, existing loans will have higher rates.

Explanation:

When the Fed raises rates, borrowing becomes more expensive. This affects businesses as they may have to pay more on existing loans (if they are variable - rate loans). Also, higher interest rates can lead to a decrease in consumer spending (as loans for consumers like mortgages, car loans become more expensive), which in turn lowers the purchasing power of consumers. This is bad for businesses as their potential customer base has less money to spend on their products or services.

Option "Yes, any increase is great news" is incorrect because rate increases are not always beneficial. Option "Yes, it means inflation is very low" is wrong because the Fed raises rates to combat inflation (not because inflation is low). Option "No, existing loans will have higher rates" is only partially correct if we assume variable - rate loans, but the more comprehensive negative impact is the lowering of purchasing power which affects business sales.

Answer:

No, it lowers purchasing power.