If Firms Have Rational Expectations and If They Set Prices

question 178

Multiple Choice

If firms have rational expectations and if they set prices and wages on this basis, then prices and wages:

• A) will always be above market- clearing levels.
• B) will always be at market- clearing levels.
• C) will, on average, be set at market- clearing levels.
• D) will never be set at market- clearing levels.

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