Question

A near by highway is being widened. You buy property along the highway because you expect property values to increase in the area. In making this investment, you are primarily using the principle of___________

Answer 1

Investing in property along a highway being widened primarily uses the principle of rational expectations.

Step-by-step explanation:

The principle being used when investing in property along a highway that is being widened is called rational expectations. Rational expectations theory suggests that even though the changes, such as the highway widening, may not happen immediately, home prices in the area are expected to rise due to the anticipation of future improvements. Buyers are willing to pay more in the present because they expect the value of the property to increase in the future.