In the context of home construction, what is the typical relationship between interest rates and employment opportunities?

• A. Interest rates have no effect on employment opportunities in home construction.
• B. As interest rates increase, employment opportunities in home construction tend to increase.
• C. As interest rates increase, employment opportunities in home construction tend to decrease.
• D. Employment opportunities in home construction are always higher when interest rates are at their lowest.

Answer: (C)

Verified step by step guidance

1. Understand the relationship between interest rates and investment: Higher interest rates increase the cost of borrowing money, which tends to reduce investment spending, including in sectors like home construction.
2. Recognize that home construction is sensitive to borrowing costs because many projects are financed through loans or mortgages; when interest rates rise, fewer people and firms are willing or able to borrow to finance new construction.
3. Analyze how reduced investment in home construction leads to fewer projects, which in turn decreases the demand for labor, thus lowering employment opportunities in this sector.
4. Conversely, when interest rates are low, borrowing is cheaper, encouraging more construction projects and increasing employment opportunities in home construction.
5. Summarize the typical relationship: as interest rates increase, employment opportunities in home construction tend to decrease, and when interest rates are low, employment opportunities tend to be higher.