Bundle: Principles of Microeconomics, 7th + LMS Integrated Aplia, 1 term Printed Access Card
7th Edition
ISBN: 9781305242463
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 12, Problem 8PA
To determine
The effect of the tax reform of 1986 on the amount of borrowing through consumer debt and home equity debt.
Expert Solution & Answer
Explanation of Solution
The tax reform act of 1986 was implemented in order to reduce the consumer debt and to increase home equity debt. As a result, people started to pay their mortgage less quickly and financed the general spending through home equity.
Economics Concept Introduction
Concept introduction:
Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy; they include income tax, property tax, professional tax, and so forth.
Tax reform of 1986: This reform eliminated the deductibility of interest payments on consumer debt but maintained the deductibility of interest payments on mortgages and home equity loans.
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Chapter 12 Solutions
Bundle: Principles of Microeconomics, 7th + LMS Integrated Aplia, 1 term Printed Access Card
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