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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Definitions:

Third Stage

In obstetrics, this refers to the phase after the delivery of the baby, during which the placenta and membranes are expelled.

Placenta

A vital organ in pregnant mammals that connects the developing fetus to the uterine wall, allowing nutrient uptake, waste elimination, and gas exchange via the mother's blood supply.

Menstruation

The monthly shedding of the uterine lining in females, part of the reproductive cycle.

Prenatal Development

The process of growth and development within the womb from conception until birth, involving various stages of physical, cellular, and organ development.