Why Did the Housing Boom of 1997-2006 Show Evidence of Time

question 2

Multiple Choice

Why did the housing boom of 1997-2006 show evidence of time bunching? I. As banks began to increase their portfolio of mortgage loans, more and more banks began to offer fast mortgage loans in hopes of making more profit. II. As builders saw the increase in home building, they also jumped on the bandwagon and started building new homes in hopes of making greater profits. III. As consumers saw other consumers purchasing houses in anticipation of rising prices, they also purchased new homes in hopes of increasing their wealth.

• A) I only
• B) I and II only
• C) II and III only
• D) I, II, and III

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Definitions:

Consumer Surplus

The distinction between what consumers are inclined and financially able to pay for a service or good and the actual payment made.

Welfare Loss

The decrease in social welfare, usually measured as lost economic efficiency, due to factors like taxes, subsidies, or market distortions.

Welfare Loss

The decrease in social welfare, usually measured as the loss of consumer and producer surplus, resulting from inefficient market conditions or government policies.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they do pay.