Declines in spending on residential construction are often due to increases in interest rates.The collapse in residential construction prior to and during the recession of 2007-2009 was due more to ________ than to higher interest rates.
A)the financial crisis that began in 2007
B)the rapid inflation of the early 2000s
C)increases in the price of lumber
D)rising wages in the construction industry

Question

Quizplus · Accepted Answer

The financial crisis that began in 2007 was the main factor that led to the collapse in residential construction. The crisis led to a tightening of credit, making it difficult for homebuyers to obtain mortgages, and resulted in a significant decline in housing demand. This, in turn, led to a sharp decrease in residential construction activity. While interest rates do affect residential construction spending, they were not the primary cause of the collapse in the housing market during the recession.

Declines in Spending on Residential Construction Are Often Due to Increases