If Housing Prices Increase by 25% and the Price of All

question 17

Multiple Choice

If housing prices increase by 25% and the price of all other goods decreases by 22%,then:

• A) the consumer price index (CPI) would definitely fall during the year in question because housing prices do not constitute the majority of the CPI.
• B) the CPI would definitely rise during the year in questions because housing prices do constitute the majority of the CPI.
• C) the CPI would rise by about 1.5% because housing constitutes about half of the market basket in the CPI.
• D) because housing spending is considered investment, the producer price index (PPI) but not the CPI would be the only price index affected by the change.
• E) the CPI would only be affected in a small way because it includes about 8,000 goods and housing is only one of the 8,000.

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Definitions:

Assignment

The transfer of rights, property, or obligations from one party to another.

Consideration

Something of value exchanged between parties to form a binding contract.

Assignment

The transfer of rights or responsibilities from one party to another, typically in a contractual context.

Security Interest

A legal claim or lien on property as collateral for the repayment of a debt, securing an interest in the property for the creditor.