Question

Juan is always researching different investment options. A few weeks ago he noticed some nice homes for sale in his neighborhood. The listed prices were below market value. Today on the news he heard that the Federal Reserve lowered interest rates for banks and that banks have lowered interest rates for home mortgages in turn. As a result, there has been a huge boom in the number of people purchasing homes. What is most likely to happen as a result of the change in interest rates? Housing prices will go up and down due to changing fiscal policy. The market will experience more demand and the price of houses will go up. The price of houses will go down in response to the decreased demand. The prices for homes in that area will be stable due to the new monetary policy.

Answer 1

Answer: The market will experience more demand and the prices of goods will rise up.

Explanation: According to a law, the higher the demand , there is a corresponding increase in the price. As a result of the lower interest rate of mortgage loans, more people have access to loan which leads to an astronomical increase in the number of house owners. Market experience more demand and therefore the prices of housing will rise up. It’s only obeying the law of demand and supply which states that the greater the demand, the higher the price.

Answer 2

Answer:

B. The market will experience more demand and price of houses will go up

Explanation:

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