Round 5: 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 rule” for this quantity through an ad hoc model with long-run neutrality. This quantity (10[1])plus government bonds, divided by the price level, leads to increased consumption in the Pigou effect. This quantity should always be increased by a fixed percentage, per Milton Friedman’s k-percent rule. This quantity can be divided into M0 (10[1])through M3, with the “zero-maturity” type measuring assets redeemable on demand. Reserve banks like the Fed control this quantity (-5[1])by buying or selling bonds to counter inflation. For 10 points, name this amount of circulating currency available in a market. ■END■ (10[1])

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