we introduce housing market to our simple economy. To keep things simple, assume that individuals rent houses and they can adjust their housing consumption each period. Individuals use x MP C fraction of their disposable income on housing and they use (1 x)MP C fraction on consumption of apples. The residential investment is similar to investment in capital stock: one apple invested today turns into one housing unit next period. The housing stock in the economy evolves by the formula Ht+1 = (1 h)Ht + I R t , where Ht is the housing stock in the economy at time t, and I R t is the residential investment at time t and h is the depreciation rate of housing stock. Let RH t be the rental rate of housing at time t. Derive a formula for RH t as a function of housing stock and other variables. What would be the effect of an increase in x on capital stock, housing stock, residential investment, capital stock investment, savings, net exports, real exchange rate, rental rate of capital and rental rate of housing in long run and very-long run? Explain in detail by showing the changes in the relevant market