Checkpoint: New House-Economy

Vernon Johnson Checkpoint: New House-Economy Principles of Economics 07/13/2012 The strength of the preservation plays a figure in topographic point(a) purchases in various ways. When the prices for homes add, consumers have less(prenominal) purchasing power. In this case, consumers may substitute a cheaper excerption in home plate of the more high-ticket(prenominal) option. Demand for the more expensive homes decreases and demand for the cheaper option increases. The cheaper option in some(a) cases would be to rent. When the economy is d stimulate, people stop buying, when sales go down, real- res publica prices go down to compensate the sales drop so they privy sell the house.1 Many middle-class homeowners count on discount as a way to save or a way to make ends meet, and the powerful real estate fabrication also depends on the mortgage interest tax. Messing with the deduction would pain the fragile housing market and decrease home set by as much as 15 percent, including homes of homeowners who own their homes outright with no mortgage. Any downward pressing on home prices will hamper the economic recovery, increase foreclosures and wounded banks abilities to lend and possibly push us into other recession. 2 The federal government can affect home purchases with taxes and use in other ways.

The federal government can arrange pressure on banks to keep interest rates at a reasonable level, thereby controlling the price of housing. Increases in interest rates make houses more expensive since the withdraw money is more expensive. To some extent, the policy of bailing o ut banks with taxpayer fall is a means of ! guardianship the banks from charging customers more on mortgages, memory them solvent and able to continue providing loans to new home buyers.3 1. The ensnare of Purchasing Power. (2012). Retrieved from hypertext transfer protocol://www.ehow.com/list_7242892_effects-purchasing-power.html 2. Government Policies That Affect living accommodations Prices. (2011). Retrieved from http://www.ehow.com/list_6749738_government-policies-affect-housing-prices.html...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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