If home prices are falling, consumers purchasing a home will find their purchasing power of money has increased. This benefit to consumers is called the
A) inflation effect.
B) wealth effect.
C) home equity effect.
D) multiplier effect.

Question

Quizplus · Accepted Answer

The benefit to consumers when home prices are falling is called the wealth effect. This means that the consumer's purchasing power of money has increased, allowing them to afford a more expensive home or purchase a home with more desirable features. The inflation effect relates to the overall increase in prices of goods and services, the home equity effect refers to the increase in value of a homeowner's property over time, and the multiplier effect pertains to the way an initial change in spending can affect the overall economy.

If Home Prices Are Falling, Consumers Purchasing a Home Will