The relationship between interest rates as a percent (X) and housing starts (Y) is given by the linear equation Y' = 4094 - 269X. What happens to housing starts as interest rates fall?
A) Housing starts remain the same.
B) Housing starts rise.
C) Housing starts fall.
D) Unable to determine from the information given.

Question

Quizplus · Accepted Answer

As interest rates fall, the coefficient of X in the equation becomes less negative. This means that for every decrease in interest rate, there will be an increase in housing starts. Therefore, housing starts will rise.

The Relationship Between Interest Rates as a Percent (X) and Housing