Why is residential investment procyclical?
What will be an ideal response?
Cyclical fluctuations of income and expected income dominate the demand for housing. The user cost of housing is composed of procyclical elements — the real interest rate and the relative price of housing — which would counter the cyclicality of residential investment. But these cost determinants (as well as the procyclical cost of construction) are overwhelmed by expected changes in the relative price of housing. Residential investment is neither deterred by a boom nor revived during a slump. Rather, it thrives during a boom and languishes until the slump has passed.
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The most common type of firm in the United States is the
A) proprietorship. B) partnership. C) corporation. D) limited partnership.
World-class models receive significant economic rents because
A) their talents and abilities are in fixed supply. B) there is a shortage of world-class models. C) there is a surplus of world-class models. D) there is no equilibrium quantity of world-class models.