The tax code in the United States allows for the deductibility of mortgage interest, but not for interest on credit cards. Why is this difference allowed to exist?
What will be an ideal response?
Increasing home ownership is seen as increasing private investment, whereas credit cards are
viewed as consumption mechanisms.
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Alicia is a vegetarian, so she does not eat beef. That is, beef provides no additional utility to Alicia. She loves potatoes, however. If we illustrate Alicia's indifference curves by drawing beef on the horizontal axis and potatoes on the vertical axis, her indifference curves will
a. slope downward. b. be vertical straight lines. c. slope upward. d. be horizontal straight lines.
A problem that the Fed faces when it attempts to control the money supply is that
a. since the U.S. has a fractional-reserve banking system, the amount of money in the economy depends in part on the behavior of depositors and bankers. b. the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools. c. while the Fed has the ability to change the money supply by a large amount, it does not have the ability to change it by a small amount. d. federal legislation in the 1950s stripped the Fed of its power to act as a lender of last resort to banks.
The shift of the budget line from cd to ab in the above figure is consistent with:
A) decreases in the prices of both M and N . B) an increase in the price of M and a decrease in the price of N . C) a decrease in money income. D) an increase in money income.
When the government provides loan guarantees and in effect "socializes losses and privatizes gains" of a project or firm, it can lead to a:
A. Moral hazard problem among investors B. Regulatory capture problem C. Principal-agent problem within the firm D. Limited and bundled choice problem