From Mid-Year 2006 to Year-End 2008, Housing Prices

question 116

Multiple Choice

From mid-year 2006 to year-end 2008, housing prices

• A) fell by approximately 30 percent, leading to a sharp reduction in aggregate demand.
• B) increased by approximately 30 percent leading to a sharp increase in aggregate demand.
• C) declined by a smaller about than in previous recessions.
• D) were unchanged, but a sharp decline in stock prices reduced aggregate demand.

---

Definitions:

Marginal Revenue Product

The additional revenue a firm generates from employing one more unit of input, such as labor or capital.

Wage Rate

The amount of compensation paid to an employee by an employer in exchange for work performed, typically expressed on an hourly, daily, or piecework basis.

Marginal Product

The incremental output produced by adding one more unit of a specific input while holding other inputs constant.

Wage Rate

The wage rate is the amount of money paid for a specific quantity of labor or service, often expressed per hour, day, or piece.