Question

5. What impact can the Fed have on housing prices ? 4. In general, there is:...

5. What impact can the Fed have on housing prices ?

4. In general, there is:

a.     a positive relationship between unemployment and inflation.

b.    an inverse relationship between unemployment and inflation.

c.     an inverse relationship between GNP and inflation.

d.    a positive relationship between GNP and unemployment.

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Answer #1

a) Fed can mange the interest rate in the market I.e. the prime lending rate,, if the rates are high the demand for the loans to buy houses will be high and that will lead to a higher price of the houses, if the interest rate is high the loans and the installments will be higher that will decease the demand and the price will fall.

b) "B"

there is an inverse relationship between the unemployment and inflation. as the inflation rises the unemployment will fall and vice versa.

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