Short Answer a. Give the Fisher Effect? How does looking at data ex ante and ex post changes the interpretation of this equation? b. As a lender you believe that the inflation rate over the next year will be 4%. You want to earn a 4% fee on a 1 year loan. At the end of the year you observe that the inflation rate was 3%. Calculate the ex ante and ex post interest rates. Are you helped or hurt by inflation as a lender? c. What are menu costs?

d. What is velocity? How does transactions velocity differ from income velocity? e. How and why might a policymaker's decision to accommodate an adverse supply shock change if the shock is believed to be temporary and not permanent?