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  3. The historically hot housing market will inevitably slow, with a possible decline in home prices and consumer spending. Speak

The historically hot housing market will inevitably slow, with a possible decline in home prices and consumer spending. Speak

admin2011-02-28  26
问题    The historically hot housing market will inevitably slow, with a possible decline in home prices and consumer spending.
   Speaking to the Kansas City Fed’s annual economic conference, Greenspan, Federal Re- serve Chairman, reemphasized that the Fed can’t now point interest rate policy at stock, housing or other asset prices, even if it were so inclined. Greenspan also said the housing cool-off doesn’t have to be painful if the nation preserves its economic flexibility. "The housing boom will inevitably cool down. As part of that process, house-sales volume will decline from currently historic levels, while home-price increases will slow and prices could even decrease," he said.
   Earlier, he had warned investors not to assume higher prices for assets such as stocks or houses were permanent, saying gains could disappear if the economy or investor sentiment turned.
   Home prices have risen 50% on average over the past five years. The average price of an existing home shot up 13.6% in the second quarter of 2005 compared with a year earlier. There are potential benefits from a housing slowdown. As prices correct and owners can’t pull as much equity from their homes, personal savings should rise and the enormous trade deficit should decline. Further, a slowing in the housing market might mean that the Fed, which has been raising interest rates since June 2004 to control potential inflation, might not have to push them as far or fast. A decline in consumer purchases could also slow growth. Consumer spending makes up about two-thirds of the economy.
   Lyle Gramley, a former Fed governor now at the Stanford Washington Research Group, does not think Greenspan was predicting a rapid adjustment in housing prices, savings and the trade deficit, but a gradual three-to five-year rear rangement.
   Greenspan, who has said the Fed’s role is not to stop market bubbles, said that it doesn’t have. the expertise to use interest rates to influence asset prices that could change in the future. The speech was probably Greenspan’s last to the Kansas City Fed conference. His term ends Jan. 31.
What is the potential benefit of house-price falling?
选项 A、Imports rise and exports decline.
B、Personal savings rise and huge trade deficit declines.
C、Inflation rises and currency depreciates.
D、Dollar appreciates and exports rise.
答案B
解析 见文章第四段第四句话 As prices correct and owners can’t pull as much equity from their homes，pernonal savings should rise and the enormous trade deficit should decline。
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