In specifying the demand for housing in terms of the rental price of housing, it is implicitly assumed that the demand for housing varies
A) positively with both the real rate of interest and the price of housing.
B) positively with the real rate of interest and negatively with the price of housing.
C) positively with the price of housing and negatively with the real rate of interest.
D) negatively with both the real rate of interest and the price of housing.
E) positively with the real rate of interest and, more important, with GDP.

Question

Quizplus · Accepted Answer

The demand for housing typically decreases as the rental price of housing or the real rate of interest increases. Higher rental prices make housing less affordable, reducing demand, while higher real interest rates increase the cost of borrowing for mortgages, also reducing demand.

In Specifying the Demand for Housing in Terms of the Rental