12. 13. 14. 15 Describe the functions of money. What is fiat money? What is commodity money? What are open market operations, and how do they influence the money supply? Explain how banks create money. What are the 1yarious ways in which the FedfCentral Bank can influence the money supply? Why might a banking crisis lead to a fall in the money supply? What costs does inflation impose on society? Write the quantity equation and explain it. What does the assumption of constant velocity imply? . Who pays the inflation tax? . If inflation rises from 6 to 8 percent, what happens to the real and nominal interest rate according to the Fisher effect? Why does the LM curye slooe upward? Define and explain the "liquidity trap" Why is the money demand curve downward sloping? . Define Central Bank money lie. the monetary base} and explain what the money multiplier is