Question

How would we expect a demand curve for houses to change when interest rates increase.

a) the demand curve will likely shift down
b) the demand curve will likely get less steep but not shift
c) the demand curve will likely shift up
d) the demand curve will likely get steeper but not shift

Answer 1

When interest rates increase, the demand curve for houses is expected to shift down.

Step-by-step explanation:

When interest rates increase, we would expect a demand curve for houses to shift down, so the correct answer is a) the demand curve will likely shift down. Higher interest rates make borrowing money more expensive, which reduces the number of people who can afford to buy houses. As a result, the demand for houses decreases, causing the demand curve to shift down.