Using Cross-Sectional Data from the Two Housing Assistance Supply Experiment

question 77

Multiple Choice

Using cross-sectional data from the two Housing Assistance Supply Experiment (HASE) sites-Brown County, Wisconsin, and St. Joseph County, Indiana, John Mulford of Rand Research estimates that the long-run "permanent" income elasticity of housing expenditures to be 0.45 for owners. Using this information, what is likely to happen to housing expenditures if the government increases income transfers to recipients in HASE sites?

• A) Housing expenditures will increase significantly.
• B) Housing expenditures in HASE sites significantly will fall as recipients moved out of these areas to higher-income areas.
• C) Housing expenditures will increase, but not significantly.
• D) Housing expenditures will decrease by a small amount.

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Definitions:

Unrealized Loss

A decrease in the value of an investment that has not yet been sold and thus, the loss has not been realized.

Gain on Sale of Investment

The profit realized from selling an investment for more than its purchase cost.

Fair Value

The estimated market value of an asset or liability based on current prices in an open and competitive market.

Equity Securities

Financial instruments that represent ownership in a company, such as stocks, entitling holders to dividends and capital gains.