If a Firm Expects the Rate of Inflation to Be

question 142

Multiple Choice

If a firm expects the rate of inflation to be 2 percent, it will expect its competitors to

• A)do anything, since firms operate under limited information.
• B)increase prices by 2 percent unless circumstances change.
• C)not raise prices unless there is a change in circumstances.
• D)increase prices by more than 2 percent unless circumstances change.
• E)increase prices by less than 2 percent unless circumstances change.

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Definitions:

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