In the stylized DSGE model with sticky prices, we can characterize contractionary monetary policy shock effect the labor market by $F F R \downarrow \rightarrow A D \uparrow \rightarrow \pi \uparrow \rightarrow \left( \frac { W } { P } \right) \uparrow$
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Question

In the stylized DSGE model with sticky prices, we can characterize contractionary monetary policy shock effect the labor market by $F F R \downarrow \rightarrow A D \uparrow \rightarrow \pi \uparrow \rightarrow \left( \frac { W } { P } \right) \uparrow$ 
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Quizplus · Accepted Answer

A contractionary monetary policy shock typically involves an increase in the federal funds rate (FFR), leading to a decrease in aggregate demand (AD), a decrease in inflation ($\pi$), and a decrease in the real wage ($\frac{W}{P}$).

In the Stylized DSGE Model with Sticky Prices, We Can FFR↓→AD↑→π↑→(WP)↑F F R \downarrow \rightarrow A D \uparrow \rightarrow \pi \uparrow \rightarrow \left( \frac { W } { P } \right) \uparrowFFR↓→AD↑→π↑→(PW​)↑

In the Stylized DSGE Model with Sticky Prices, We Can $F F R \downarrow \rightarrow A D \uparrow \rightarrow \pi \uparrow \rightarrow \left( \frac { W } { P } \right) \uparrow$