The model of supply and demand leads to the prediction that high interest rates cause:
A) an increase in the price of housing and a decrease in the number of homes purchased.
B) a decrease in the price of housing and an increase in the number of homes purchased.
C) an increase in both housing prices and the number of homes purchased.
D) a decrease in both housing prices and the number of homes purchased.

Question

Quizplus · Accepted Answer

High interest rates increase the cost of borrowing, which typically reduces demand for housing, leading to lower prices and fewer homes being purchased.

The Model of Supply and Demand Leads to the Prediction