Suppose All Home Values Fall by $50,000,such That When a Person

question 52

Multiple Choice

Suppose all home values fall by $50,000,such that when a person moves,they have to take a $50,000 loss as they had borrowed up to the full value of the house.However,assume movers still have the credit to buy a new home.How will this event affect the mobility of homeowners as compared to losing $50,000 in the stock market?

• A) Mobility will be the same as either loss is a sunk cost.
• B) The loss in home value will reduce the mobility of owners more because by not moving, they can avoid facing the loss in their home's value.
• C) The loss in home value will increase mobility because homes elsewhere are now $50,000 cheaper.
• D) The loss in home value will increase mobility only if homes are expected to appreciate more than stocks.

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Definitions:

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