Recall Application 1, "Measuring Price Stickiness in Consumer Markets," to answer the following questions:
-According to the application, Bils and Klenow found that between 1995- 1997, prices in more than half of the 350 goods that they were studying showed frequent price changes. This finding was contrary to Kashyap's finding because:
A) custom auction prices.
B) the economy during that time was in a recession.
C) unemployment rates during that time were rising.
D) the inflation during that period was low.

Question

Quizplus · Accepted Answer

Kashyap's finding was that prices in consumer markets were sticky and changed infrequently, but Bils and Klenow found that more than half the prices they studied changed frequently. This contradicts Kashyap's finding and suggests that prices in consumer markets may not be as sticky as previously thought. The other choices (custom auction prices, recession, rising unemployment rates) are not relevant to the explanation of why Bils and Klenow's finding contradicts Kashyap's.

Recall Application 1, "Measuring Price Stickiness in Consumer Markets," to Answer