=+7.10 Policy Application: Tax Deductibility and Tax Credits: In end-of-chapter exercise 2.17, you were asked to think

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=+7.10 Policy Application: Tax Deductibility and Tax Credits: In end-of-chapter exercise 2.17, you were asked to think about the impact of tax deductibility on a household’s budget constraint.

A. Suppose we begin in a system in which mortgage interest is not deductible and then tax deductibility of mortgage interest is introduced.

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