Packet E: Tossup 6

The dynamics explaining why exogenous policy can only affect this quantity in one direction are described as “pushing on a string.” Thomas Sargent and Neil Wallace outlined an “optimal (10[1])rule” for this quantity through an ad hoc model (-5[2])with long-run neutrality. This quantity (10[1])plus government bonds, divided by the price level, leads to increased consumption in the Pigou effect. (-5[1])This quantity (-5[1])should always be increased (-5[1])by a fixed percentage, (-5[1])per (-5[1])Milton (-5[1])Friedman’s (10[2]-5[1])k-percent (10[4]-5[2])rule. (10[6]-5[3])This quantity (-5[3])can be (10[1])divided into M0 (10[2])through (10[1])M3, (10[5])with the (10[1])“zero-maturity” (10[8]-5[1])type (10[2])measuring (10[1])assets (-5[1])redeemable on demand. (10[2])Reserve banks like the Fed (10[1]-5[1])control (-5[1])this quantity (-5[4])by (-5[1])buying (-5[4])or (-5[1])selling bonds (10[1]-5[1])to (10[1])counter (10[1])inflation. (10[1])For 10 points, name this amount of circulating (10[1])currency (10[1])available in a market. (10[3])■END■ (10[20]0[6])

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