IT IS GENERALLY ACCEPTED that observed measures of the money stock do not completely reflect the policy actions of the Federal Reserve in controlling economic activity [1, 3, 5]. The reason is that the observed money supply is composed of two components: (1) an exogeneous or policy induced component which represents the attempt of the monetary authorities to "lean against the wind," and (2) an endogenous component which responds to movements in business activity to "meet the needs of trade." In order to obtain an unbiased indicator of monetary policy, the endogenous or cyclically induced component must be removed from the observed money supply. The remaining policy induced component can then be used to investigate the behavior of the monetary authorities. Patric Hendershott [4] has estimated a quarterly measure of the policy component of the money supply for the period 1952-1964; which he calls the Neutralized Money Stock (NMS). Based on a visual comparison of the turning points in NMS with periods of "ease" and "restraint" in policy actions during recessions and expansions in the economy [4, pp. 118-141], Hendershott reaches three conclusions: