Since 1980, average mortgage interest rates have fluctuated from a low of under 4% to a high of over 14%. Is there a relationship between the amount of money people borrow and the interest rate that’s offered? Here is a scatterplot of Total Mortgages in the United States (in millions of 2005 dollars) versus Interest Rate at various times over 26 years. The correlation is -0.84.
For these data Kendall’s tau is-0.61. Does that provide proof that if mortgage rates are lowered people will take out more mortgages? Explain what Kendall’s tau says and does not say.
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