Housing Starts
Exercises


Questions and Exercises

1. Explain why housing starts are sensitive to cyclical business cycle factors such as interest rates, real income, unemployment rates, and consumer confidence.

2. Based on what you have learned about the relationship between housing starts and the business cycle, what do you think happened to housing starts during 1979, particularly the last quarter of 1979, prior to the recession that began in January 1980? Access the data series on housing starts and plot the data for 1979. Provide an explanation for the change in housing starts based on economic theory.

3. Access the data series on housing starts at Economagic.com. What has been the trend in housing starts over the last six months? Based on this trend, what is your forecast of economic activity in the next six months?

4. Access the data series on the S&P 500 at Economagic.com, and compare it to US housing starts data since 2001. What are the various economic explanations for the recent declines in the US stock market and rising housing starts?

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