Which of the following is most likely to increase after an increase in aggregate real personal income?A.Equity pricesB.Building permits for new private housing unitsC.The ratio of consumer installment debt to income
Question
Which of the following is most likely to increase after an increase in aggregate real personal income?A.Equity pricesB.Building permits for new private housing unitsC.The ratio of consumer installment debt to income
Solution
The increase in aggregate real personal income is likely to have a positive impact on all three options provided - Equity prices, Building permits for new private housing units, and The ratio of consumer installment debt to income. However, the most direct and immediate impact would probably be on:
A. Equity Prices: When personal income increases, people have more disposable income. Some of this extra income might be invested in the stock market, which would increase the demand for stocks and, consequently, their prices.
B. Building Permits for New Private Housing Units: An increase in income might also lead to an increase in demand for housing. As people's purchasing power increases, they might decide to buy a house or upgrade their current living situation. This would increase the demand for new housing, leading to an increase in building permits for new private housing units.
C. The Ratio of Consumer Installment Debt to Income: This ratio might also increase as people's income increases. With more disposable income, people might decide to take on more debt because they feel more confident in their ability to repay it. However, this is less direct and immediate than the other two effects.
In conclusion, while all three options could potentially increase after an increase in aggregate real personal income, the most likely to increase would be Equity Prices and Building Permits for New Private Housing Units.
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