During 2002 – 2005, there were significant increases in the construction of new housing stock in the US. During the same time period, we also observed significant rises in the demand for homes. We know that during that time period both the price and the level of homes traded increased. Based on that information what most likely happened in the market?

The rise in supply outpaced the rise in demand

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The rise in demand outpaced the rise in supply

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The rise in demand was perfectly matched by rise in the supply

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None of the above

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Solution

The correct option is B
The rise in demand outpaced the rise in supply

The rise in demand outpaced the rise in supply, and hence, lead to an increase in price.

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The correct option is B The rise in demand outpaced the rise in supply The rise in demand outpaced the rise in supply, and hence, lead to an increase in price.

The correct option is B
The rise in demand outpaced the rise in supply

The rise in demand outpaced the rise in supply, and hence, lead to an increase in price.