Abstract
responses to Isaac's comment come under four headings : (1) Isaac's misinterpretation of our analysis as an attempt to offer "a strong case for preferring a 'k-percent' money growth rule to a validation rule"; (2) the claim that our model necessarily assumes labor hours to be constant; (3) some misunderstandings regarding the consistency of our model; and (4) Isaac's suggested reformulations of our model. With respect to (3) and (4), Isaac's analysis neglects the mechanism by which imposition of a validation (money growth) rule renders our model consistent and once this misconception is cleared up, it appears that Isaac's reformulations should perhaps be viewed as special limiting cases (with either nominal claims growth or unemployment held constant) of the more general set-up given in our original paper.
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