a new house- economy - marginal costs outweigh the marginal...

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Running head: A NEW HOUSE - ECONOMY 1 A New House - Economy Tina Jagosz XECO/212 04/27/2011 Don MacLean
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A NEW HOUSE - ECONOMY 2 A New House – Economy The strength of the economy The strength of the economy as a whole could affect the marginal benefits and the marginal costs associated with a decision to purchase a home. During times of economic growth, a consumer may feel that the purchase of a new house is a good decision because it allows the consumer to enjoy a better living environment. The consumer is not worried about mortgage or spending since the buyer is optimistic about the economic situation. Therefore, the buyer feels that the marginal benefits outweigh marginal costs. On the other hand, during times of recession, a consumer may feel that purchasing a new house is an unwise decision since the buyer would be thinking about saving money since the economy is in bad shape. The buyer would feel that the
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Unformatted text preview: marginal costs outweigh the marginal benefits. Removal of the tax deduction on mortgage interest The removal of the tax deduction on mortgage interest will reduce demand for houses since it reduces the benefits for which a consumer can enjoy the purchase of a new house. Other economic policies can alter a consumer’s decisions. For example, when the government increases income tax, consumers will have less disposable income and are thus less willing and able to purchase homes. This reduces demand for houses. Changes in government spending and taxes When the government increases government spending by building better infrastructures, it helps to attract investments and promote economic growth. As a result, consumers are more willing and able to purchase new houses and this can result in an increase in demand for houses. A NEW HOUSE - ECONOMY 3...
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This note was uploaded on 07/10/2011 for the course ECON 101 taught by Professor Monte during the Spring '11 term at Ludwig Maximilians Universität.

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a new house- economy - marginal costs outweigh the marginal...

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