#5 - Home ownership is a sign of economic prosperity.

[Administrator]

Question #5: Resolve the Paradox. The correct answer choice is (A)

The fifth question in this section presents us with a reasonably straightforward conundrum: if home ownership is truly a sign of economic prosperity, why is it the case that in many European and North American regions high levels of home ownership correspond with low levels of economic prosperity (“high levels of unemployment,” more specifically)?

The correct answer to this question will supply an active reason to explain how the two conflicting ideas—high levels of home ownership paired with high levels of unemployment—could realistically coexist. In short, it will answer the “why” question above.

From a prephrasing standpoint, you should be looking for an answer that outlines an economically-detrimental outcome of home ownership. Can you predict with confidence exactly what that outcome might be? No, probably not, or at least not with certainty. So instead move aggressively to the answer choices with a broader framework: does this explain why owning a home might restrict economic/employment opportunities?

Answer choice (A): This is the correct answer choice. As expected, the correct answer provides an employment-limiting consequence of home ownership: owning a home makes it more difficult to relocate to a job-rich region. If that’s the case, then it seems entirely reasonable to believe the paradox in the stimulus could occur.

Answer choice (B): serves to exacerbate the paradox, as homeownership seemingly puts home owners in closer proximity to employment opportunities, and thus should correspond to low levels of unemployment.

Answer choice (C): This is a classic Resolve the Paradox trap answer. It merely restates, or reemphasizes, the facts of the stimulus, without providing an explanation as to their cause. Remember, your goal here is an active one: we need an answer that gives a reason for why the apparent conflict could occur. Restating that the conflict exists does nothing to help explain it.

Answer choice (D): Like answer choice (B), this choice makes the apparent conflict even more paradoxical. By stating that homeowners tend to form support networks and thereby learn of job availability it seems much more likely that homeowners would face lower unemployment, not higher as we’re told in the stimulus.

Answer choice (E): While few people choose this option, it is an intriguing answer to examine. Essentially what this puts forth is the opposite of the paradox—equating the early stage of home ownership (buying a house) with a feeling of economic security—that neither explains home ownership’s correspondence to high unemployment, nor addresses the paradox on a meaningful time scale. That is, it simply deals with purchasing a home, not home ownership itself which would generally be considered to extend well beyond the impetus for the initial purchase. At any rate, it does nothing to explain the discrepancy in the stimulus, and is therefore incorrect.

[dshin117]

I don't understand how we can eliminate E in favor of A. Both answer choices appear to call for unsupported assumptions.
The phenomenon we are trying to explain is about how home ownership, which is a sign of economic prosperity, corresponds with high levels of unemployment (which is clearly not). I really don't see how AC A explains this phenomenon. This AC is saying that home ownership makes it more difficult to move to a place where jobs are more plentiful. For this AC to work, we need to make the assumption that people are buying homes in places with low employment in the first place and they're stuck there so they can't go to places with better employment. But isn't that what we are trying to explain? Why ARE they buying places with low employment. That still has yet to be answered. I feel that this answer choice requires us to assume what we ought to prove. AC E also requires an assumption which I believe is more reasonable. Perhaps its economically secure people who don't need to work (people who are retired, for ex) that are buying houses. It's a potential explanation for both factors that correlate together. Yes it requires the assumption that economically secure people don't have to work but I don't see how that's more unreasonable than the assumption we have to make for AC A.

[Jeff Wren]

Hi dshin,

The problem with your interpretation of Answer E is that the word "unemployment" has a very specific definition. It only refers to people who are not currently working but are trying to work. It does not include people who are retired or otherwise independently wealthy and not looking for work. For example, when economists talk about the unemployment rate, that is the percentage of people who are not currently working but are trying to work out of the total number of people in the labor force. People who not working and are not looking for work (such as those who are retired, children, full-time college students, etc.) are not considered part of the labor force and are not considered "unemployed" even though they are not currently working.

As for Answer A, one simple explanation is that people buy homes where they were working, then lose their job at some later point, but then are unable to easily find another job in that town and are also unable to easily move to another city/town, which results in them being homeowners but also unemployed. This phenomenon is quite common in small towns that were built around one company or one factory. When that one company or factory closes, everyone in the town who worked there loses their job and cannot easily find another job in that town or easily move (since no one wants to buy their house because the town is no longer a desirable place to live since it no longer has any work).