Question 3 Tax deductibility of home mortgage interest A helps everyone to purchase a house. B helps people in higher tax brackets more than people in low tax brackets. improves efficiency of the market for homes. D is an efficient way to subsidize homeownership. Question 4 Exclusion of state and local bond interest from federal income tax A) is an efficient means of subsidizing state and local governments. B encourages state and local governments to reduce spending on local public services. costs the federal treasury less than the implicit savings of the state and local governments, reduces the interest rate state and local governments must pay on borrowed funds