You notice that when interest rates increases, new residential housing prices tend to decrease. This observation indicates that
A) a scatter diagram between interest rates and housing prices will show a negative relationship.
B) higher interest rates must cause low housing prices.
C) a scatter diagram between interest rates and housing prices will show a direct relationship.
D) there must be false causality between interest rates and housing prices.

Question

Quizplus · Accepted Answer

The observation indicates that there is a negative relationship between interest rates and housing prices, as an increase in interest rates leads to a decrease in housing prices. Therefore, the scatter diagram between interest rates and housing prices will show a negative relationship. Option B is incorrect because it assumes a causal relationship, but the observation only shows a correlation. Option C is incorrect because a direct relationship would mean that an increase in interest rates would lead to an increase in housing prices, which is not what the observation suggests. Option D is incorrect because there is no indication of false causality in the observation.

You Notice That When Interest Rates Increases, New Residential Housing