Knut Wicksell claimed there was a version of this quantity that was "neutral" towards prices. More r
Knut Wicksell claimed there was a version of this quantity that was "neutral" towards prices. More recent authors define Wicksell's "natural" version of this as the value at which GDP equals potential GDP. On the IS-LM diagram, this value must decrease as output increases in order for investment and savings to be in equilibrium. Paul Krugman has criticized the Federal Reserve's zero lower bound policies where this value is (*) left very close to nothing. The Taylor Rule suggests how a central bank can raise or lower this value to control inflation. The virtual inability of this value to go below zero can lead to a liquidity trap, when people hoard cash rather than invest by loaning it to others. For 10 points, name this rate that is the cost of borrowing money.