Question

What does our text conclude about falling prices in the housing market?

Falling prices is only a good thing if it happens due to a decrease in the demand for houses.

Falling prices in the housing market means that people expect the future price of houses to be lower; this negatively impacts the current demand for houses if prices fall consistently.

All of the listed choices are correct.

When prices rise and then fall in cycles, it will not negatively affect the current demand for houses if prices fall.

When prices fall consistently and when prices fall as a result of falling construction costs, it will not decrease the current demand for houses.

What is the Gold Standard and why did it fail?

The Gold Standard is a standard of financial excellence adopted by private banks in the United States. Banks that have high equity capital and loans with low risks achieve this standard. The standard became obscure when most large banks failed to live up to its standards.

The Gold Standard is a monetary system that requires businesses and households to make their transactions in the form of gold (instead of the currency we use today). It failed because most countries ran out of gold and could not come up with enough supply for the millions of transactions in its economy each day.

A country achieves the Gold Standard when it is able to keep its "misery index" (the sum of inflation and unemployment) below 6%. The standard is often not achieved because either the unemployment rate is too high or the inflation rate is too high during most years.

The Gold Standard is a monetary rule (first proposed by Milton Friedman) forcing the central bank to increase the money supply by exactly 4% each year. It failed because the central bank wanted to keep the money supply constant instead of allowing it to grow by 4%.

The Gold Standard is a rule that tells the central bank of a country to limit the growth of its money to the growth of the supply of gold available. It failed because the central bank was not disciplined enough to limit the expansion of the money supply.

Answer 1

A.The price of housing tends to falls when there is weak demand in the economy or when the consumers do not have the purchasing power to afford it.Falling house prices leads to recession because housing is a form of consumers main wealth.

If the prices fall consistently then the demand is negatively affect because it signals recession or that the future returns on housing would be lower.

Answer-B

B.Gold standard was a system of exchange where a country's value of currency was linked to the value of gold and transactions were supposed to be made according to the value of the gold.It failed because all the country did not have the same amount of gold because gold is a resource which is not available equally everywhere.

Answer-B.