1A.) What do researchers mean when they ask “Why does monetary policy have real effects on the economy?"1B.)Use the evidence in the table (image) to discuss the research main findings and its implications for macroeconomic policy. Probability of a Price IncreaseProbability of a Price Increase80%70%Figure 1. - Probability of price increase following a cost increaseFIGURE 1.-PROBABILITY PRICES INCREASE FOLLOWING A COST INCREASEA. Unweighted60%50%40%80%70%60%50%40%Price increasedPrice decreasedNo price changeSample sizeThe table reports the percentage of times that the retail price changed when the cost changed.0TABLE 1.-FREQUENCY OF COST AND PRICE CHANGESCostIncreases71.2% 71.6%274.8% 73.8%266.8%70.6%0.9%28.5%11,36868Number of SKUsB. Weighted by Prior Revenue69.8%41068Number of SKUs10Cost Decreases59.8%1259.4%125.7%9.2%85.2%4,1941414

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What do researchers mean when they ask “Why does monetary policy have real effects on the economy?

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Chapter1: Making Economics Decisions

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Question

1A.) What do researchers mean when they ask “Why does monetary policy have real effects on the economy?"

1B.)Use the evidence in the table (image) to discuss the research main findings and its implications for macroeconomic policy.

Probability of a Price Increase
Probability of a Price Increase
80%
70%
Figure 1. - Probability of price increase following a cost increase
FIGURE 1.-PROBABILITY PRICES INCREASE FOLLOWING A COST INCREASE
A. Unweighted
60%
50%
40%
80%
70%
60%
50%
40%
Price increased
Price decreased
No price change
Sample size
The table reports the percentage of times that the retail price changed when the cost changed.
0
TABLE 1.-FREQUENCY OF COST AND PRICE CHANGES
Cost
Increases
71.2% 71.6%
2
74.8% 73.8%
2
66.8%
70.6%
0.9%
28.5%
11,368
6
8
Number of SKUs
B. Weighted by Prior Revenue
69.8%
4
10
6
8
Number of SKUs
10
Cost Decreases
59.8%
12
59.4%
12
5.7%
9.2%
85.2%
4,194
14
14

Branch of economics that analyzes the behavior and performance of an economy as a whole. It focuses on the study of aggregates and evaluates changes related to unemployment, gross domestic product, inflation, monetary and fiscal policies of the government.

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