gmatbull wrote:
Housing is one of the most effective ways to stimulate the economy. To stimulate housing, the Federal Reserve
lowered the interest rates for mortgages with the aim of making mortgages more affordable. While this stimulus
did lead to increased housing purchases initially, it eventually led to home price inflation, making homes quite
unaffordable for first time buyers.
Which of the following conclusions about first time buyers is best supported by the passage?
A: The stimulus did not improve the economic condition of most first time home buyers enough to absorb the rise
in home prices
B: Apartment prices went up due to increasing demand from first time home buyers
C: Other than first time home buyers, all other buyers in the housing market were able to make use of the low
income rates and purchase houses at a price lower than they would have paid had the stimulus not been put
into effect.
D: More and more college students started living with their parents longer
E: more and more jobs were created due to the stimulus
OA after discussion.
Hi,
Let's look at the below statement from the passage since this is the statement talking about first time buyers:
"While this stimulus did lead to increased housing purchases initially, it eventually led to home price inflation, making homes quite unaffordable for first time buyers."
It says:
- Stimulus increased housing purchases initially -
but this purchases were made by whom? First time buyers or others or both- it eventually led to home price inflation
- Inflation made homes quite unaffordable for first time buyers - so, first time buyers could not afford the new prices.
Now, let's look at the option statements:A: The stimulus did not improve the economic condition of most first time home buyers enough to absorb the rise in home prices -
This can be inferred from the last line of the passage. Here, presence of "most" in "...most home buyers..." does not make it incorrect since the last line does not say that only a few were not able to afford, it makes a general that the first time buyers could not afford new prices. Let's keep this option and evaluate other options.B: Apartment prices went up due to increasing demand from first time home buyers -
We don't know who made the initial home purchases; whether they were first time buyers or repeat buyers. So, this statement cannot be inferred.C: Other than first time home buyers, all other buyers in the housing market were able to make use of the low income rates and purchase houses at a price lower than they would have paid had the stimulus not been put into effect. -
Can we say "all other buyers were able to make use...". No. This is a very strong statement talking about all other customers. We certainly can't make such a sweeping statement based on the passage.D: More and more college students started living with their parents longer - Incorrect. Out of Scope.
E: more and more jobs were created due to the stimulus - Incorrect. Out of Scope.
So, after the analysis, we are left with option A only; therefore, it is the correct choice.
Hope this helps
-Chiranjeev