Holding other factors constant, the decline in aggregate income during a recession will ______ the price of housing and ______ the flow of residential housing investment.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

During a recession, the decline in aggregate income reduces the demand for housing, leading to a decrease in housing prices. Lower housing prices, in turn, reduce the incentive for residential housing investment, leading to a decrease in the flow of residential housing investment.

Holding Other Factors Constant, the Decline in Aggregate Income During