S. Klepper, Economics 73-100, Fall 2011

Mini-test 6

In the last twenty years, the price of new homes has risen faster than the rate of inflation. Which of the following factors could have contributed to the long-run increase in the price of new homes relative to the rate of inflation?

Mark true for a factor that could have contributed to the long-run price increase and false otherwise and provide explanations for each of your answers.

_____1. With baby boomers coming of age, there has been a steady rise in the last twenty years in the number of new home buyers.

_____2. The prices of materials used to produce new homes have gone up in the last twenty years by more than the rate of inflation.

_____3. The steady rise in income per capita in the U.S. over the last twenty years has resulted in more people wanting to buy new homes.

_____4. A series of regulations have been imposed on new home producers in the last twenty years that have increased the cost of building new homes by more than the rate of inflation.

_____5. New techniques have reduced the costs to buyers of maintaining new homes over the last twenty years.