Among other things, the changes to the tax code enacted in $2017$ limited the

federal tax deduction that could be claimed for payment of state and local taxes. Analyze the

impact this change in the federal tax code had on the market for tax exempt bonds.

a$)$ Explain why this event influenced the market by spelling out which

basic factor it influenced, and explaining which curve shifted as a result and in which direction.

Event: Reduced availability of other

opportunities for tax deductions.

Factor:

Curve:

c$)$ Based on this change in the equilibrium, what is the impact on:

i$.$ the yield of tax exempt bonds, RE$,$

ii$.$ the quantity issued, QE$,$ and

iii. the implied marginal tax bracket TM$,$

iv$.$ Explain how you know what the impact was on TM$.$