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Xeco 212 - a New House Economy

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A New House Economy

Carrine Hamlett

XECO/212

March 11, 2012

Chiara Yates


A New House Economy

 Before making any type of large purchase you must always think about the marginal cost versus the marginal benefits.  There are times when the profit turns out better than the price making the purchase an economically reasonable one.  This is specifically appropriate when purchasing a home, which is considered a large purchase to make as an individual.    

The strength of the economy as a whole can affect the marginal benefits and marginal costs when making a choice to purchase a home.  According to Mankiw (2007), some buyers think because the economy is doing good that it is a good time to purchase a house.  During this time the consumer believes that the economy will increase instead of decrease, and they are not considering how much their mortgage payment will be.  Because of this they may think that the marginal benefits are higher than the marginal costs.  When we are in a recession, a potential purchaser may think it is not in his or her best interest to purchase a home during this time.  Another way it can affect home ownership is for the following reasons; it can decide the market price that has to be paid at closing and important factor involving interest rates.  

If the government were to remove tax deductions on mortgage interest, this will make owning a home much cheaper.  It would affect the housing market because the demand for houses will decrease and the cost for houses will decrease even greater.  

When the government decides to lower spending to help the budget, they choose not to make any form of large purchases. The government is in control of the entire industries and markets and they are familiar with the different types of movements and the results of their procedures.  

   

References

Tax Incentives and Demand for Mortgage Debt:   Evidence from the Finnish 1993 Tax Reform

Saarimaa, Tuukka; International Journal of Housing Policy, March 2010

https://ehis.ebscohost.com/eds/results

Home Mortgage Interest Deduction

http://www.realty101.com/mortgage-interest-deduction

Mankiw, N.G. (2007). Principles of economics (4th ed.). Mason, OH: South-Western Cengage Learning

 

Written Checkpoint Grading Form for New House – Economy, Due Week Seven

Content and Development  

25 Points

Points Earned

22/25

15

Additional Comments:

Student covers all key elements of the assignment in a substantive way.

  • Explain how 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.
  • How does the removal of the tax deduction on mortgage interest affect the housing market?
  • How do other changes in government spending and taxes affect your decision?
  • The paper is 250 to 300 words in length.

Content is well developed although you need to pay attention not to jump to conclusions unless you have sources to substantiate it.

You did not substantiate any part of your essay with the sources you researched.

One reference is provided.

3

The content is comprehensive, accurate, and persuasive.

7

Mechanics

5 Points

Points Earned

3/5

Additional Comments:

The paper, including the title page, reference page, tables, and appendixes, follows APA formatting guidelines.

1

The references are not formatted following APA guidelines and there are not citations throughout the essay.

Citations of original works within the body of the paper follow APA guidelines.

1

Rules of grammar, usage, and punctuation are followed.

1

Spelling is correct.

2

Total

30 Points

Points Earned

25/30

Overall Comments:

Carrine, you developed a good essay although except for Mankiw you did not use any of the sources you researched to substantiate and validate any part of the content. That is the purposes of the sources and have no value if just listed in the references. Make sure to apply APA guidelines more closely. You can use the reference generator provided by the college to get the formatting right.

The federal government implements it's fiscal policies by controlling it's spending, either increasing or cutting it's spending and by controlling how much income comes into the government takes in by increasing it's taxes or cutting it's taxes. At this point in the economy I believe the government should expansionary the fiscal policy for certain income brackets, the people with lower incomes are the people that aren't spending money. This would increase those people to spend more money or even purchase items they can't afford know. I think the government needs to make more changes to the housing market in order to improve today's economy issues.

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