Which of the Following Is an Assumption of the Information-Based

question 48

Multiple Choice

Which of the following is an assumption of the information-based model of supply developed by Lucas?

• A) Prices and wages are assumed to be flexible.
• B) People are not fully informed about what is going on in the economy.
• C) A positive correlation between supply price and quantity is assumed for firms' individual supply curves.
• D) All of the above are accurate.
• E) None of the above is accurate.

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Definitions:

SRAS Curve

The Short-Run Aggregate Supply curve, which shows the relationship between the price levels in an economy and the quantity of goods and services that producers are willing to supply in the short term.

Passive Approach

An investment strategy or management style where decisions are minimal in an effort to mimic the returns of a particular market or index.

Aggregate Demand

The holistic demand for goods and services throughout an economy, estimated at a predetermined price level over a particular period.

Active Approach

A proactive strategy in management or policy-making that involves taking deliberate actions to achieve specific goals.