Submit a 250- to 300-word response addressing the following points: 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?

When purchasing a home it is very important to take note of the economy at that time. At times the economy favors buyers and other times it favors sellers. To ensure that you purchase your home that the right time in the market, you must make sure you consider the marginal benefits and the marginal costs associated with purchasing a new home. Marginal benefits refer to the change in benefits over the change in quantity and marginal costs are the change in cost over the change in quantity. For example, during a recession it would not seem as though purchasing a home would be a good idea because the marginal costs would outweigh the benefits. During recessions the majority of consumers are spending less and trying to save as much as possible and therefore will not want to take out a mortgage on a home.
The removal of the tax deduction on mortgage interest will negatively affect the housing market because it will take away one of the benefits to owning a home. This will make less people want to buy new homes. Having the mortgage interest deducted on your taxes each year gives an extra boost in the homeowner’s refund that could be used for home improvements or other expensive purchases.
When I bought my home one of the incentives I was excited to take advantage of was the tax credit that was given for first time home buyers. I bought my house in 2008 and when I did my taxes for 2008 I was able to get an extra few thousand dollars in my refund.