Homebuilders will often pay the closing costs (title, insurance, etc.) of prospective homebuyers? Explain in terms of supply and demand what homebuilders are trying to do with this practice
What will be an ideal response?
The homebuilders are simply trying to stimulate demand. By offering to pay prospective homebuyers' closing cost it is almost the equivalent of handing these buyers extra income. Their ability and willingness to pay has increased. It can bring buyers into the market who would able to afford to buy a home except for the obstacle of having to come up with the cash for closing costs.
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The figure above shows Sam's budget line. Sam's budget line shows
A) which combinations of gasoline and coffee Sam can afford. B) which combinations of gasoline and coffee Sam is planning to purchase. C) whether or not Sam thinks gasoline and coffee are worth their prices. D) whether or not Sam currently has enough gasoline and enough coffee.
Monetarists emphasize
a. crowding-out but not the liquidity trap. b. crowding-out and the liquidity trap. c. the liquidity trap but not crowding-out. d. neither crowding-out nor the liquidity trap.