1. The U.S. Internal Revenue Service (IRS) provides tax deductions for mortgage interest paid on both new and used homes by homeowners across the country. Utilizing the principle of economic incentives and their potential for unintended consequences, address the following points. Explain all in full.
a. What incentive does this give to U.S. residents?
b. Does it affect the type, style, or location of homes preferred by prospective home buyers?
c. What might happen to home values if the deduction were ever eliminated?
2. Historically, countries have oftentimes been tempted to merely print more money to pay off their debts. Utilizing your readings in this chapter, address the following points.
a. What might be the impact over time of such practices on the prices of everyday goods and services in these economies?
b. Investigate the Venezuelan economy. What is their current situation with price increases in that country? In other words, what is their inflation picture today? Explain some possible reasons for their situation.
c. In your opinion and based upon your readings, would it ever be possible for the U.S. to succumb to the same inflationary pressures as Venezuela?