Describe in your own words the difference between real and nominal interest rates. (b) 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? (c) We don't usually think of physical cash as a savings vehicle, but in some ways a dollar bill resembles a bond. They're both certificates that can be redeemed for dollars. 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? (d) Explain what happens in a liquidity trap. (see chapter 12) (e) Give an example of a policy that a government can use to control the money supply in a liquidity trap