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

question 56

Multiple Choice

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? For what interest rate will the maximum
Number of housing starts be achieved?

• A) Housing starts remain the same; 0%
• B) Housing starts rise; 0%
• C) Housing starts fall; 10%
• D) Housing starts rise; 15%

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Definitions:

Actuarial Rate

The rate developed by actuaries based on statistical data, used in calculating insurance premiums and pension contributions.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and, subsequently, eroding purchasing power.

Personal Trusts

Legal arrangements where assets are held by a trustee for the benefit of another party, often used for estate planning, to manage wealth, or provide for beneficiaries according to the grantor's specifications.

Futures Contracts

Financial derivatives that obligate the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price.