Residential investment is affected by monetary policy since

Question

Quizplus · Accepted Answer

Residential investment is affected by monetary policy through multiple channels. Changes in the real interest rate affect the rate of return on residential investment, making it more or less attractive to invest in housing. Changes in the nominal interest rate affect the ability of many potential homebuyers to pay for a home or meet monthly mortgage payments, which impacts demand for housing. Tighter monetary policy may induce mortgage lenders to ration credit, making it harder for potential borrowers to finance a home purchase. Finally, changes in interest rates may affect the ability of housing developers to get financing, which can impact the supply of new housing.

Residential Investment Is Affected by Monetary Policy Since