HW

1. The complete version of the Thomas Sargent quote that began this chapter is "Persistent high inflation is always and everywhere a fiscal phenomenon." Why did Sargent include the modifiers "persistent high"?

2. In the lecture we talked about the importance of information asymmetries for the functioning of (credit) markets. In 2001, George Akerlof, Michael Spence and Joseph Stiglitz were awarded the Nobelprize in Economics for “for their analyses of markets with asymmetric information”.

Go to http://www.nobelprize.org/nobelprizes/economics/laureates/2001/popular.html and read the report. Summarize the ideas of George Akerlof and explain why they are important for banking and credit markets.