The Imperfect-Information Model of the Lucas Aggregate Supply Curve Assumes

question 38

Multiple Choice

The imperfect-information model of the Lucas aggregate supply curve assumes that

• A)firms cannot be sure whether higher prices are caused by higher demand or simply reflect an increase in the overall price level
• B)outsiders have imperfect information and only insiders can take part in wage negotiations
• C)in an imperfectly competitive environment even small menu costs will deter firms from changing their prices
• D)even under imperfect information, firms make optimal decisions, so the full-employment level of output is always maintained
• E)all of the above

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