Problem 1: What is money and why does anyone want it?
Problem 2: Explain the concept of the opportunity cost of holding money.
Problem 3: Explain why an increase in U.S. interest rates relative to UK relative interest rate would affect the U.S. - UK exchange rate.
Problem 4: Suppose that a person's wealth is $50,000 and that her yearly income is $60,000. also suppose that her money demand function is given by Md =$Y10.35-i2. Derive the demand for bonds. Suppose the interest rate increases by 10 percent points. What is the effect on the demand for bonds?
Problem 5: What are the effects of an increase in income on her demand for money and her demand for bonds?