In the US, most people finance their home purchases using relatively long-term fixed-rate mortgages. In the UK, most people finance their home purchases using short-term adjustable-rate mortgages. 

How does this difference in mortgage finance affect the slope of the Cd curves in the two countries (with respect to interest rates)? Hint: Think about how disposable income responds to changes in the real interest rate with the two types of mortgages. 

Suppose that the US and the UK have the same MP curves. How does the difference in mortgage finance affect the slope of the AD curve? 

Now suppose that the US and the UK can have different MP curves. If the two monetary authorities want to have AD curves with the same slope, how would their MP curves have to differ?

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FixedRate vs AdjustableRate Mortgages An Overview Fixedrate mortgages and adjustablerate mortgages ARMs are the two primary mortgage types While the marketplace offers numerous varieties within these ... View the full answer