Describe the Intended Effects of the First-Time Home Buyer Tax

question 21

Essay

Describe the intended effects of the first-time home buyer tax credits granted by Congress and many state governments in 2009 and 2010.In addition,describe in detail the unintended effect of this type of legislation.

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Definitions:

Excess Reserves

The reserves that banks hold in excess of the required minimum, often held in the central bank, which can lend them out to generate interest.

New Loans

Any sums of borrowed money that have recently been provided by a lender to a borrower.

Reserve Requirement

The minimum amount of reserves a bank must hold against deposits, set by the central bank, influencing the money supply and banking stability. A rephrased definition since "Required Reserves" is a similar concept.

Open Market Purchase

An activity by a central bank to buy securities in the open market to increase the money supply and stimulate economic growth.