The study looks at how productivity shocks and wage changes affect inflation and output in a unionized labor market. The researchers find that there is a trade-off between stabilizing inflation and output. When productivity goes down, inflation decreases, but when wages go up, inflation increases. The Central Bank can adjust interest rates to stabilize the economy, but the response may not always be one-to-one. The model shows that the relationship between productivity shocks and employment is influenced by the type of monetary policy in place. The results align with the idea that changes in employment are more significant than changes in real wages.