If All Economic Agents Have Rational Expectations

question 12

Multiple Choice

If all economic agents have rational expectations,

• A)wages and prices must be perfectly flexible
• B)imperfect competition will not lead to an undesirable outcome
• C)involuntary unemployment cannot exist
• D)some small menu cost of changing prices may still exist, preventing markets from clearing rapidly
• E)none of the above

---

Definitions:

Electrical Synapses

Specialized junctions between cells that allow for direct passage of ions and electrical signals, enabling rapid communication.

Glial Cells

Supportive cells in the central nervous system that do not produce electrical impulses but perform functions such as nutrient support, waste cleanup, and myelin formation around neurons.

Histamine

A compound involved in local immune responses, functioning as a neurotransmitter and playing a role in regulating physiological function in the gut and acting as a mediator of itching.

Arousal

A state of heightened physiological and psychological activity, involving the brain, various bodily systems, and behavior.