This question is on Money and Monetary Theory

A. Use the quantity theory of money to explain the classical dichotomy and monetary neutrality.

B. What is M3? With a fractional reserve banking system, what determines the total money aggregate of M3?

C. The Reserve Bank of Australia adopted the inflation target of 2-3 percent in 1993 using the main policy instrument of the cashrate. What is the cash rate? Why does the RBA control the cash rate, rather than a monetary aggregate, such as M3? How is the inflation target policy implemented via the Open Market Operations?