1 Money Questions 1. Derive the Fisher Relation between nominal interest rate R, inflation rate i, and real interest rate r. 2. A dollar bill is a certificate from the government that costs exactly one dollar, and can be redeemed at any time for exactly one dollar. What is the nominal return on holding a dollar bill? What is the real return? 3. Explain what happens in a liquidity trap. 4. Give an example of a policy that a government can use to control the money supply in a liquidity trap. 5. What are some advantages and disadvantages of having a fiat currency as opposed to a currency backed by some specific commodity? In particular, how does this change the kinds of policy which a government can enact