Final answer:
The naming of a city as the site of a major event typically leads to an immediate increase in home prices and demand due to rational expectations of future economic benefits. Option B.
Step-by-step explanation:
When a city is named the site of a major event, such as a political convention or a large sporting event, the impact on housing can be significant. The most immediate effect is usually an increase in home prices, which can occur due to the influx of people needing housing and the expectation of economic growth associated with the event.
This phenomenon can be explained by the theory of rational expectations, which suggests that home prices will adjust immediately based on the anticipation of future benefits to the area.
These benefits might include not only the initial employment surge from the event itself but also potential long-term improvements to infrastructure or increased visibility of the city on a national or international stage.
However, it is important to consider the overall economic impact of such events as well. Siegfried and Zimbalist argue that although a city might experience a temporary boost in terms of employment and tourism, overall entertainment spending within the local economy might just be reallocated rather than increased.
This could mean that the longer-term economic benefits are less significant than initially expected. Therefore, while home prices and home demand may increase in the short term, the long-term economic impact on the housing market and local economy could be variable. Option B.