8.If you owned a bank, would you rather that it be (a) illiquid, or (b) insolvent? Explain your answer. Chapters 9 and 15.

9.If interest rates fell, would you expect that house prices would (a) rise, or (b) fall? Explain your answer. The answer to Quiz 22, Questions 3-4 and 6-7, will help you.

10.Imagine the federal government were to cut the marginal rate of income tax on people's earnings from work. Why might this policy reduce tax revenue in the short run yet increase tax revenue in the long run? Consider how incentives to work, save, and take risks cause people to change their behavior as time passes.

11.Distinguish between a progressive tax system and a regressive tax system. Consider two categories of peoplethe rich and the poor. Whothe rich or the poorpay more tax under a progressive tax system? Who pay more tax under a regressive tax system? Who pay a higher percentage of their taxable income under a progressive tax system? And who pay a higher percentage of their taxable income under a regressive tax system? "The Bottom Line on the Distribution of Federal Taxes" in Chapter 17.

12.Which one factor(a) economists' ignorance of how the economy works, (b) shorter time lags between policy implementation and the response of economic agents to policy changes, (c) inaccurate and incomplete statistics, (d) pressure from private lobbyists for government favors, or (e) the president's desire to get reelectedwould likely assist the federal government in achieving macroeconomic stability? Explain your answer. Ask yourself: If you were the federal government, which one would you prefer to face?