You are a loan officer at "Highmark Sales"a (fictitious) real estate brokerage employing multiple realtors. Your role is to educate new employees on the mechanics of price and interest rate movements and their effects on activities of the brokerage. As a loan officer, you present material quarterly illustrating how price and interest rate movements affect spending on real estate investments (homes, office buildings, rental units, undeveloped land) and the financing costs associated with them. You support agents selling homes and other property in your area. Economic activity in your region, including activity in real estate and financial markets, depends on employment, consumer price inflation, interest rates, and other factors. Real estate agents working for this brokerage are often unaware of market trends affecting sales in the local market. Your efforts lead to a more successful sales team, as both buyers and sellers are more realistic in pricing expectations, allowing more transactions to occur successfully.

This month, your routine presentation looks more complex than usual. News reports indicate that demand has fallen, and you understand that in the short and longer term, effects may vary. You also understand that the short term will involve two separate changes. You note that, given the factors considered, change may not be uni-directional. Consideration of long and short-term effects may might not uni-directional in nature. Factors such as wealth or expectations may complicate the analysis. You ponder the effect on your community and real estate sales in this region, understanding that this will depend on unemployment (creating downward pressure on sales) and other factors.

Assume a trend in employment and output witnessed nationally will affect activity in the local economy. Consider initial and secondary effects of a fall in Consumption and Investment Spending on a local firm and its employed individuals. These individuals must analyze the shift in the aggregate demand (AD) function to predict equilibrium GDP and price levels in the short and long term. In your role as this brokerage's technical advisor dealing with economic concerns, determine the following information for the brokerage's other staff:

1. Given the circumstances outlined here, do you expect spending on homes and other high-value goods (such as vehicles, home appliances, vacations) in local communities to rise or fall, and for what reasons?
2. In the longer term, when all prices may vary, given the circumstances outlined here, do you expect spending on homes and other high-value goods (such as vehicles, home appliances, vacations) in local communities to rise or fall, and for what reasons?