If the government enacts legislation which allows lenders to lower lending standards, the government the demand for which leads to house prices.

increases, increase

Explanation:

When the government makes any laws or legislates any laws that allows the lender to lend the money at low lending rates, then the demand for buying house will increase as people now can get loan at a much low rates or much low down payments. This increases the demand for buying houses but it also increases the cost of the houses as the demand increases.

Thu the answer is increases, increase

answer; the federal reserve system;