2min chapter

Planet Money cover image

The quest to save macroeconomics from itself

Planet Money

CHAPTER

The Importance of Price Adjustment in Macroeconomics

People forget how surprising it is that monetary policy does anything at all. If you double the amount of money in the economy, but all the prices instantly double, then absolutely nothing happens. It's like saying if we measure your height in centimeters or inches, you're still going to be the same height. What monetary policy is controlling is literally just the units. And so how do you get to a place where the units matter? That's where you have to come back to price adjustment.

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