Homework #2
Due 10/14 at the end of class
(same due date as homework #1)
1. You have been put in charge of selecting a new medium of exchange for the economy. Choose something to serve as money, and evaluate it in terms of the properties that a medium of exchange must satisfy in order to be useful.
2. What is meant by the term "fractionally backed currency"? How does fractionally backed currency come about?
3. Briefly, how do nominal interest rates, ex-ante real interest rates, and ex-post real interest rates differ? Of the two real rates, which is the most important for understanding economic decisions?
4. Briefly describe the major functions of Federal Reserve district banks.
