The accompanying figure shows new U.S. housing starts, in thousands of units per month, between January 1980 and December 2016. The graph shows a large drop in new housing starts from 1984–1991 and 2006–2009. New housing starts are related to the availability of mortgages.

a. What caused the drop in new housing starts from 1984–1991?

b. What caused the drop in new housing starts from 2006–2009?

c. How could better regulation of financial institutions have prevented these two instances?

Transcribed Image Text:

New housing starts (thousands) 2,500 2,000 1,500 1,000 500 1980 1985 1990 1995 2000 2005 2010 2016 Krugman/Wells, Essentials of Economics, 5e2020 Worth Publishers Data from: Federal Reserve Bank of St. Louis. Year