Suppose real estate prices rise by 40 percent in a four-year period, while goods and services rise in price by 8 percent in the same time period. Population, the stock of houses, and other variables important to real estate prices have remained almost constant. Which of the following is most likely?

Question

Quizplus · Accepted Answer

Asset inflation has occurred because the significant increase in real estate prices compared to the modest increase in the prices of goods and services suggests that the value of the real estate asset class has inflated without a corresponding increase in real wealth or overall economic output.

Suppose Real Estate Prices Rise by 40 Percent in a Four-Year